SUN CITY TAXPAYERS'ASS'N v. Citizens Utilities Co.

• Decision Date: 01 February 1994
• Docket Number: Civ. No. 3:93-CV-364 (JAC).
• Citation: 847 F. Supp. 281
• Parties: SUN CITY TAXPAYERS' ASSOCIATION v. CITIZENS UTILITIES COMPANY.
• Court: U.S. District Court — District of Connecticut

847 F. Supp. 281

SUN CITY TAXPAYERS' ASSOCIATION v. CITIZENS UTILITIES COMPANY.

Civ. No. 3:93-CV-364 (JAC).

United States District Court, D. Connecticut.

February 1, 1994.

COPYRIGHT MATERIAL OMITTED

Jonathan D. Elliot and Elliot I. Miller, Kleban & Samor, P.C., Southport, CT, for plaintiff.

James F. Stapleton, Day, Berry & Howard, Stamford, CT, Joseph E. Mais and Anthony L. Marks, Brown & Bain, Phoenix, AZ, for defendant.

RULING ON DEFENDANT'S MOTION TO DISMISS

JOSÉ A. CABRANES, Chief Judge:

This is an action by the Sun City Taxpayers' Association ("Association"), an Arizona not-for-profit corporation, claiming to represent residential real estate owners in Sun City, Arizona. The Association alleges that Citizens Utilities Company ("Utilities"), was involved in a scheme to submit false information to the Arizona Corporation Commission ("Arizona Commission"), Arizona's utility rate-setting authority, in order to secure approval of higher-than-proper utility rates.

This court has federal question jurisdiction pursuant to 28 U.S.C. § 1331 and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"). Pending before the court is the defendant's motion to dismiss.

BACKGROUND

The Association alleges that on two or more occasions Utilities used the United States Postal Service, interstate telephone calls, telecopier transmissions and other interstate wire facilities in furtherance of a scheme to defraud, in violation of 18 U.S.C. §§ 1341 (mail fraud) and 1343 (wire fraud). According to the Association, Utilities' alleged actions constitute predicate acts of "racketeering activity" as defined by 18 U.S.C. § 1961(1)(B) and form a "pattern of racketeering activity" as defined by 18 U.S.C. § 1961(5).

The Association alleges that between 1968 and 1978, the defendant caused fraudulent statements to be entered on the accounting books of its subsidiaries, Sun City Water Company and Sun City Sewer Company (water and sewer service providers for Sun City), in order to procure from the Arizona Commission higher utility rates than it would otherwise have been entitled to secure. Complaint (filed Feb. 19, 1993) ("Complaint"), ¶ 14. The plaintiff seeks, inter alia, treble damages and costs and attorney's fees under 18 U.S.C. § 1964(c), based on the alleged violations of 18 U.S.C. § 1962(a), (b), and (c). Complaint, ¶¶ 30-32; p. 22.

The defendant has moved to dismiss the Complaint (1) pursuant to Fed.R.Civ.P. 9(b), for failure to plead fraud with particularity, and (2) pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief can be granted. The defendant contends that even if the allegations in the Complaint were deemed to be pleaded with the requisite particularity, and even if all of the allegations are true, the plaintiff cannot maintain this action because: (1) the Association lacks standing, (2) the "Filed Rate Doctrine" bars the plaintiff's cause of action, and (3) the Complaint fails to state a cognizable RICO claim.¹ Following the filing of a response to this motion by the Association and a reply memorandum by Utilities, the court heard oral argument on the defendant's motion at a hearing held on the record in open court. Accordingly, the defendant's motion is now ripe for consideration and decision by the court.

DISCUSSION

I.

In deciding a motion to dismiss, a court must presume all factual allegations in the complaint to be true and must draw any reasonable inferences in favor of the nonmoving party. See 2A Moore's Federal Practice ¶ 12.07 (2d ed. 1991); See, e.g., Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 1081, 31 L.Ed.2d 263 (1972); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957); Yoder v. Orthomolecular Nutrition Inst., Inc., 751 F.2d 555, 562 (2d Cir.1985). In an action arising under RICO, any supplemental facts provided in a RICO case statement are likewise taken as true. McLaughlin v. Anderson, 962 F.2d 187, 189 (2d Cir.1992). Dismissal is not warranted unless "it appears beyond all doubt that the plaintiff can prove no set of facts in support of the claim which would entitle him to relief." Conley, 355 U.S. at 45-46, 78 S.Ct. at 101-102. "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir.1978), cert. denied, 441 U.S. 965, 99 S.Ct. 2416, 60 L.Ed.2d 1072 (1979). The question for this court to decide is "whether or not it appears to a certainty under existing law that no relief can be granted under any set of facts that might be proved in support of the plaintiff's claims." De La Cruz, 582 F.2d at 48.

A. Standing

The first question is whether the plaintiff has standing to bring this action. It is, of course, the general rule that a party must establish a personal stake in the action in order to invoke federal jurisdiction. See, e.g., Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975); United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 687, 93 S.Ct. 2405, 2415, 37 L.Ed.2d 254 (1973).

Although an organization does have standing to sue in its own right to seek relief from injury to itself, see Warth, 422 U.S. at 511, 95 S.Ct. at 2211, organizations do not have standing to represent their vision of the public interest, their "interest in a problem" or "their own value preferences" absent some asserted injury to the organization or to its members. Sierra Club v. Morton, 405 U.S. 727, 736-41, 92 S.Ct. 1361, 1367-69, 31 L.Ed.2d 636 (1972); SCRAP, 412 U.S. at 683-87, 93 S.Ct. at 2413-16; Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 485-86 & n. 22, 102 S.Ct. 752, 765-66 n. 22, 70 L.Ed.2d 700 (1982); see also Schlesinger v. Reservists Committee to Stop the War, 418 U.S. 208, 223 n. 13, 94 S.Ct. 2925, 2933 n. 13, 41 L.Ed.2d 706 (1974); Sullivan v. Syracuse Housing Authority, 962 F.2d 1101, 1107 (2d Cir.1992); Matter of Appointment of Independent Counsel, 766 F.2d 70, 73-74 (2d Cir.1985), cert. denied, 474 U.S. 1020, 106 S.Ct. 569, 88 L.Ed.2d 554 (1985) ("Independent Counsel").

In attempting to "secure relief from injury to itself the association may assert the rights of its members, at least so long as the challenged infractions adversely affect its members' associational ties." Warth, 422 U.S. at 511, 95 S.Ct. at 2211 (emphasis added); see also N.A.A.C.P. v. Alabama, 357 U.S. 449, 458-60, 78 S.Ct. 1163, 1169-71, 2 L.Ed.2d 1488 (1958) (organization had standing to assert the rights of its members not to disclose their membership, because requiring members to assert their right not to disclose their membership nullified the right at the moment of assertion); Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 186-87, 71 S.Ct. 624, 655-56, 95 L.Ed. 817 (1951) (Jackson, J., concurring). In this case the Association has neither alleged an injury to itself nor alleged that its members' associational ties have been affected. See, e.g., Certified Official Transcript of October 4, 1993 Hearing (filed Oct. 13, 1993) ("Transcript") at 46-47; RICO Case Statement (filed Feb. 19, 1993), ¶ 4. The Association does not claim that it paid the alleged higher utility rates. Id. Moreover, while the Association claims to be protecting the pecuniary interest of its members, it does not explain how the alleged overpayment of utility rates by its members affects the members' "associational" ties. Id.

Nevertheless, an organization that has not suffered an injury itself can sue as the representative of its members if "(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit." Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 343, 97 S.Ct. 2434, 2441, 53 L.Ed.2d 383 (1977). But as the Supreme Court stated in Warth and Hunt, whether an organization has standing as the representative of its members depends substantially upon the type of relief sought:

If in a proper case the association seeks a declaration, injunction, or some other form of prospective relief, it can reasonably be supposed that the remedy, if granted, will inure to the benefit of those members of the association actually injured. Indeed, in all cases in which we have expressly recognized standing in associations to represent their members, the relief sought has been of this kind.

Id. at 343, 97 S.Ct. at 2441 (quoting Warth, 422 U.S. at 515, 95 S.Ct. at 2213).

The Association meets the first two requirements of the Hunt test. First, each of the Association's members has standing to bring this action in his or her own right because each member has allegedly suffered a "distinct and palpable injury," Warth, 422 U.S. at 501, 95 S.Ct. at 2206, as a result of the alleged "illegal conduct of the defendant," Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99, 99 S.Ct. 1601, 1607, 60 L.Ed.2d 66 (1979), which could be redressed by a favorable court decision. Independent Counsel, 766 F.2d at 74 (citing Valley Forge, 454 U.S. at 472, 102 S.Ct. at 758). Second, the interests the Association seeks to protect are germane to the organization's purpose — one of the purposes of the Association is to investigate and determine the fairness and reasonableness of utility charges.²

However, the Association fails to meet the third part of the Hunt test because the relief requested requires that each member of the Association be a party to the suit. In Warth, the Supreme Court found that an organization did not have standing to represent its members' interest because the damages claimed were not common...