Tafflin v. Levitt, No. 88-1650

CourtUnited States Supreme Court
Writing for the CourtO'CONNOR, J., delivered the opinion for a unanimous Court. WHITE
Citation110 S.Ct. 792,107 L.Ed.2d 887,493 U.S. 455
PartiesFrancine TAFFLIN, et al., Petitioners v. Jeffrey A. LEVITT et al
Decision Date22 January 1990
Docket NumberNo. 88-1650

493 U.S. 455
110 S.Ct. 792
107 L.Ed.2d 887
Francine TAFFLIN, et al., Petitioners

v.

Jeffrey A. LEVITT et al.

No. 88-1650.
Argued Nov. 27, 1989.
Decided Jan. 22, 1990.

Leave to File Second Petition for rehearing denied April 23, 1990.

See 495 U.S. 915, 110 S.Ct. 1942.

Syllabus

Petitioners, nonresidents of Maryland who are holders of unpaid certificates of deposit issued by a failed Maryland savings and loan association, filed a civil action in the Federal District Court against respondents, former association officers and directors and others, alleging claims under, inter alia, the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968. The court dismissed the action, concluding, among other things, that federal abstention was appropriate as to the civil RICO claims, which had been raised in pending litigation in state court, since state courts have concurrent jurisdiction over such claims. The Court of Appeals affirmed.

Held:

State courts have concurrent jurisdiction over civil RICO claims. The presumption in favor of such jurisdiction has not been rebutted by any of the factors identified in Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 478, 101 S.Ct. 2870, 2875, 69 L.Ed.2d 784. Pp. 458-467.

(a) As petitioners concede, there is nothing in RICO's explicit language to suggest that Congress has, by affirmative enactment, divested state courts of civil RICO jurisdiction. To the contrary, § 1964(c)'s grant of federal jurisdiction over civil RICO claims is plainly permissive and thus does not operate to oust state courts from concurrent jurisdiction. Pp. 460-461.

(b) RICO's legislative history reveals no evidence that Congress even considered the question of concurrent jurisdiction, much less any suggestion that Congress affirmatively intended to confer exclusive jurisdiction over civil RICO claims on the federal courts. Petitioners' argument that, because Congress modeled § 1964(c) after § 4 of the Clayton Act—which confers exclusive jurisdiction on the federal courts—it intended, by implication, to grant exclusive federal jurisdiction over § 1964(c) claims is rejected. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346, and Agency Holding Corp. v. Malley-Duff & Assocs., 483 U.S. 143, 107 S.Ct. 2759, 97 L.Ed.2d 121, are distinguished, since those cases looked to the Clayton Act in interpreting RICO without the benefit of a background juridical presumption of the type presented here. Pp. 461-463.

(c) No "clear incompatibility" exists between state court jurisdiction and federal interests. The interest in uniform interpretation of federal criminal laws, see 18 U.S.C. § 3231, is not inconsistent with such juris-

Page 456

diction merely because state courts would be required to construe the federal crimes that constitute RICO predicate acts. Section 1964(c) claims are not "offenses against the laws of the United States," § 3231, and do not result in the imposition of criminal sanctions. There is also no significant danger of inconsistent application of federal criminal law, since federal courts would not be bound by state court interpretations of predicate acts, since state courts would be guided by federal court interpretations of federal criminal law, and since any state court judgments misinterpreting federal criminal law would be subject to direct review by this Court. Moreover, state courts have the ability to handle the complexities of civil RICO actions. Many cases involve asserted violations of state law, over which state courts presumably have greater expertise, and it would seem anomalous to rule that they are incompetent to adjudicate civil RICO claims when such claims are subject to adjudication by arbitration, see Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 239, 107 S.Ct. 2332, 2344, 96 L.Ed.2d 185. Further, although the fact that RICO's procedural mechanisms are applicable only in federal court may tend to suggest that Congress intended exclusive federal jurisdiction, it does not by itself suffice to create a "clear incompatibility" with federal interests. And, to the extent that Congress intended RICO to serve broad remedial purposes, concurrent jurisdiction will advance rather than jeopardize federal policies underlying the statute. Pp. 464-467.

865 F.2d 595 (CA4 1989), affirmed.

O'CONNOR, J., delivered the opinion for a unanimous Court. WHITE, J., filed a concurring opinion, post, p. 467. SCALIA, J., filed a concurring opinion, in which KENNEDY, J., joined, post, p. 469.

M. Norman Goldberger, Philadelphia, Pa., for petitioners.

Andrew H. Marks, Washington, D.C., for respondents.

Justice O'CONNOR delivered the opinion of the Court.

This case requires us to decide whether state courts have concurrent jurisdiction over civil actions brought under the

Page 457

Racketeer Influenced and Corrupt Organizations Act (RICO), Pub.L. 91-452, Title IX, 84 Stat. 941, as amended, 18 U.S.C. §§ 1961-1968.

I

The underlying litigation arises from the failure of Old Court Savings & Loan, Inc. (Old Court), a Maryland savings and loan association, and the attendant collapse of the Maryland Savings-Share Insurance Corp. (MSSIC), a state-chartered nonprofit corporation created to insure accounts in Maryland savings and loan associations that were not federally insured. See Brandenburg v. Seidel, 859 F.2d 1179, 1181-1183 (CA4 1988) (reviewing history of Maryland's savings and loan crisis). Petitioners are nonresidents of Maryland who hold unpaid certificates of deposit issued by Old Court. Respondents are the former officers and directors of Old Court, the former officers and directors of MSSIC, the law firm of Old Court and MSSIC, the accounting firm of Old Court, and the State of Maryland Deposit Insurance Fund Corp., the state-created successor to MSSIC. Petitioners allege various state law causes of action as well as claims under the Securities Exchange Act of 1934 (Exchange Act), 48 Stat. 881, 15 U.S.C. § 78a et seq., and RICO.

The District Court granted respondents' motions to dismiss, concluding that petitioners had failed to state a claim under the Exchange Act and that, because state courts have concurrent jurisdiction over civil RICO claims, federal abstention was appropriate for the other causes of action because they had been raised in pending litigation in state court. The Court of Appeals for the Fourth Circuit affirmed. 865 F.2d 595 (1989). The Court of Appeals agreed with the District Court that the Old Court certificates of deposit were not "securities" within the meaning of the Exchange Act, see 15 U.S.C. § 78c(a)(10), and that petitioners' Exchange Act claims were therefore properly dismissed. 865 F.2d, at 598-599. The Court of Appeals further held, in reliance on its prior decision in Brandenburg v. Seidel,

Page 458

supra, that "a RICO action could be instituted in a state court and that Maryland's 'comprehensive scheme for the rehabilitation and liquidation of insolvent state-chartered savings and loan associations,' 859 F.2d at 1191, provided a proper basis for the district court to abstain under the authority of Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943)." 865 F.2d, at 600 (citations omitted).

To resolve a conflict among the federal appellate courts and state supreme courts,1 we granted certiorari limited to the question whether state courts have concurrent jurisdiction over civil RICO claims. 490 U.S. 1089, 109 S.Ct. 2428, 104 L.Ed.2d 985 (1989). We hold that they do and accordingly affirm the judgment of the Court of Appeals.

II

We begin with the axiom that, under our federal system, the States possess sovereignty concurrent with that of the Federal Government, subject only to limitations imposed by the Supremacy Clause. Under this system of dual sovereignty, we have consistently held that state courts have inherent authority, and are thus presumptively competent, to adjudicate claims arising under the laws of the United States. See, e.g., Houston v. Moore, 5 Wheat. 1, 25-26, 5 L.Ed. 19

Page 459

(1820); Claflin v. Houseman, 93 U.S. 130, 136-137, 23 L.Ed. 833 (1876); Plaquemines Tropical Fruit Co. v. Henderson, 170 U.S. 511, 517, 18 S.Ct. 685, 688, 42 L.Ed. 1126 (1898); Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 507-508, 82 S.Ct. 519, 522-523, 7 L.Ed.2d 483 (1962); Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 477-478, 101 S.Ct. 2870, 2874-2875, 69 L.Ed.2d 784 (1981). As we noted in Claflin, "if exclusive jurisdiction be neither express nor implied, the State courts have concurrent jurisdiction whenever, by their own constitution, they are competent to take it." 93 U.S., at 136; see also Dowd Box, supra, 368 U.S. at 507-508, 82 S.Ct., at 522-523 ("We start with the premise that nothing in the concept of our federal system prevents state courts from enforcing rights created by federal law. Concurrent jurisdiction has been a common phenomenon in our judicial history, and exclusive federal court jurisdiction over cases arising under federal law has been the exception rather than the rule"). See generally 1 J. Kent, Commentaries on American Law *400; The Federalist No. 82 (A. Hamilton); F. Frankfurter & J. Landis, The Business of the Supreme Court 5-12 (1927); H. Friendly, Federal Jurisdiction: A General View 8-11 (1973).

This deeply rooted presumption in favor of concurrent state court jurisdiction is, of course, rebutted if Congress affirmatively ousts the state courts of jurisdiction over a particular federal claim. See, e.g., Claflin, supra, 93 U.S. at 137 ("Congress may, if it see[s] fit, give to the Federal courts exclusive jurisdiction") (citations omitted); see also Houston, supra, 5 Wheat. at 25-26. As we stated in Gulf Offshore:

"In considering the propriety of state-court jurisdiction over any particular federal claim, the Court begins with the presumption that state courts enjoy concurrent jurisdiction. Congress,...

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    ...regional circuit courts, of course, can rely on and apply the body of patent law the Federal Circuit has developed. See Tafflin v. Levitt, 493 U.S. 455, 465, 110 S.Ct. 792, 107 L.Ed.2d 887 (1990) (finding that state courts applying RICO statutes will be “guided by federal court interpretati......
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    ...Id. at 1309. Similarly, in the instant case, although a state court generally could hear plaintiffs' RICO claims, Tafflin v. Levitt, 493 U.S. 455, 458, 110 S.Ct. 792, 794-95, 107 L.Ed.2d 887 (1990), the workers' compensation board does not. Moreover, even if this were not true, because of t......
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