Volmar Distributors v. New York Post Co., 92 Civ. 2875 (WCC).

• Decision Date: 22 September 1995
• Docket Number: No. 92 Civ. 2875 (WCC).,92 Civ. 2875 (WCC).
• Citation: 899 F. Supp. 1187
• Parties: VOLMAR DISTRIBUTORS, INC. and Interboro Distributors, Inc. d/b/a Media Masters Distributors, and Rez Associates, Inc., Plaintiffs, v. The NEW YORK POST CO., INC., Maxwell Newspapers, Inc., El Diario Associates, Pelham News Co. Inc., American Periodical Distributors, Inc., Vincent Orlando, Newspaper and Mail Deliverers Union of New York and Vicinity and Douglas La Chance, Defendants.
• Court: U.S. District Court — Southern District of New York

899 F. Supp. 1187

VOLMAR DISTRIBUTORS, INC. and Interboro Distributors, Inc. d/b/a Media Masters Distributors, and Rez Associates, Inc., Plaintiffs, v. The NEW YORK POST CO., INC., Maxwell Newspapers, Inc., El Diario Associates, Pelham News Co. Inc., American Periodical Distributors, Inc., Vincent Orlando, Newspaper and Mail Deliverers Union of New York and Vicinity and Douglas La Chance, Defendants.

No. 92 Civ. 2875 (WCC).

United States District Court, S.D. New York.

September 22, 1995.

Sylvor, Schneer, Gold & Morelli, New York City (Iris S. Richman, of counsel), for plaintiffs.

Sipser, Weinstock, Harper & Dorn, New York City (Seth Kupferberg, of counsel), for defendant.

WILLIAM C. CONNER, Senior District Judge.

Plaintiffs Volmar Distributors, Inc. ("Volmar") and Interboro Distributors, Inc. ("Interboro") bring this action against The New York Post Co., Inc. (the "Post"), Maxwell Newspapers, Inc., publisher of The Daily News, (the "News"), and El Diario Assoc. ("El Diario"), (collectively the "Publisher Defendants"); Pelham News Co. Inc. ("Pelham") and American Periodical Distributors, Inc. ("American"), (collectively the "Distributor Defendants"), and; Vincent Orlando ("Orlando"), the Newspaper and Mail Deliverer's Union (the "NMDU"), and Douglas La Chance ("La Chance") to contest plaintiffs' termination as distributors of El Diario, The Daily News, and The New York Post. The Fourth Amended Complaint asserts violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962, 1964, and state law claims for unfair competition and breach of contract. Defendant NMDU moves to dismiss the RICO and unfair competition claims asserted against it. For the reasons stated below, we grant its motion.

BACKGROUND

The Post, the News, and El Diario are New York-based newspaper publishers. Volmar, Interboro, American and Pelham are independent, non-unionized newspaper distributors in the New York metropolitan area. Plaintiffs bring this action to contest the Distributor Defendants' termination of their El Diario, The Daily News, and The New York Post distribution contracts, which occurred in late 1991 and early 1992. The facts alleged in the Fourth Amended Complaint are as follows:

There are three principal methods by which newspapers are distributed in the New York area. First, the newspaper publishers own and operate trucks driven by unionized drivers. In addition, there are independent, unionized distributors and independent, nonunionized distributors, the latter of which service those parts of the market that lack sufficient volume or are too geographically remote to attract a unionized distributor. All relevant unionized newspaper distributors, both independent and publisher-owned, have collective bargaining agreements with the NMDU. The Distributor Defendants, nonunionized distributors such as plaintiffs, are owned and controlled by Orlando. Defendant La Chance also has a beneficial interest in these companies.

In 1991, La Chance was elected president of the NMDU. Sometime after he decided to run for office in 1990, he agreed with Orlando to use his position in the union to expand the business of the Distributor Defendants. To further this scheme, La Chance offered labor concessions to the Publisher Defendants in return for their agreement to cut off plaintiffs as distributors and award their distributorships to Pelham and American. In addition, La Chance threatened labor strife if the transfers were not made.

Subsequent to the Publisher Defendants' termination of them as distributors, plaintiffs filed the instant suit for federal and state antitrust violations, civil RICO violations, and various common law causes of action against the parties allegedly involved in the conspiracy to terminate their distributorships.¹ By order dated May 22, 1993, this Court upheld plaintiffs' RICO claims based on § 1962(c) & (d) against the Publisher and Distributor Defendants' motion to dismiss. Volmar Distributors, Inc. v. New York Post, Inc., 825 F.Supp. 1153, 1169 (S.D.N.Y.1993). However, because neither La Chance nor the NMDU joined in that motion, the Court declined to address whether the allegations of the Second Amended Complaint at issue therein were sufficiently pled under Rule 9(b), Fed.R.Civ.P., as to those defendants. Id. at 1162. The NMDU now moves under Rules 9(b) and 12(b)(6) to dismiss both the RICO claim and the common law unfair competition claim asserted against it in the Fourth Amended Complaint.²

DISCUSSION

On a motion to dismiss we must accept all allegations in the complaint as true, Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, ___ U.S. ___, ___, 113 S.Ct. 1160, 1161, 122 L.Ed.2d 517 (1993), and draw all reasonable inferences in favor of the plaintiff. Walker v. City of New York, 974 F.2d 293, 298 (2d Cir.1992), cert. denied, ___ U.S. ___, 113 S.Ct. 1387, 122 L.Ed.2d 762 (1993). We will dismiss the action only if, from the face of the complaint, "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, 101-02, 2 L.Ed.2d 80 (1957).

A. RICO

As to plaintiffs' RICO claim, the NMDU asserts 1) that it cannot be held liable for the actions of its former president La Chance under the RICO Act; 2) that plaintiffs have insufficiently pled predicate acts on which they base the NMDU's RICO violations, and; 3) that RICO claims against the NMDU are preempted by the Labor Management Relations Act (the "LMRA"), 29 U.S.C. §§ 141-187. We will address each of their arguments as necessary below.

Section 1962(c) prohibits any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, from conducting or participating, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity. 18 U.S.C. § 1962(c). Section 1962(d) prohibits a conspiracy to violate 1962(c). 18 U.S.C. § 1962(d). Plaintiffs contend that the NMDU violated these statutes³ 1) by using the mails and wires to issue false and fraudulent statements in connection with the 1991 election of its officers that it would faithfully represent its membership's interests in violation of 18 U.S.C. §§ 1341, 1343; 2) by La Chance's direct or indirect acceptance of payments from the Publisher Defendants in the form of distribution rights and from the Distributor Defendants in the form of money and a beneficial interest in Pelham and American in violation of the Taft-Hartley Act, 18 U.S.C. § 186(a), (b), and; 3) by threatening labor strife if plaintiffs' distributorships went unterminated in violation of the Hobbs Act, 18 U.S.C. § 1951.

To sustain RICO liability under § 1692(c) against the NMDU, plaintiffs must allege that the union engaged in a "pattern of racketeering activity." While at a statutory minimum, this merely requires pleading at least two "predicate acts" of prohibited conduct within a ten year period, see 18 U.S.C. § 1961(5), in practice, plaintiffs must plead the commission of at least two predicate acts "that were related and that amounted to, or threatened the likelihood of, continued criminal activity." H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). These "predicate acts" are defined as including specifically enumerated federal criminal offenses, such as mail fraud, wire fraud, Taft-Hartley Act violations, and Hobbs Act violations. 18 U.S.C. § 1961(1). Therefore, in assessing plaintiffs' RICO claims against the union, we must determine whether the alleged predicate acts (a) constitute proscribed racketeering activity; (b) if so, whether they are attributable to the union, and; (c) if so, whether the union thereby engaged in a pattern of racketeering activity.

1. Mail and Wire Fraud

Plaintiffs base their mail and wire fraud predicate claim against the NMDU on false statements that the NMDU communicated to its 4,000 members between December, 1990 through May, 1991, indicating that it would faithfully represent its membership. The NMDU argues that because plaintiffs fail to allege that these statements were made in furtherance of the alleged fraudulent scheme, they cannot predicate a RICO claim on violations of the mail or wire fraud statutes.

In our prior opinion, we held that plaintiffs had stated a valid predicate claim for mail and wire fraud against the NMDU based on those statements. Volmar, 825 F.Supp. at 1162. However, because the NMDU had not joined in that motion to dismiss, we did not specifically address the argument it raises now. After examining the complaint in light of the NMDU's contention, we agree with the NMDU that plaintiffs have failed to properly allege a claim for mail or wire fraud against it.⁴

To base a RICO claim on the violation of the mail fraud statute, plaintiffs must allege the existence of a fraudulent scheme and a mailing in furtherance of that scheme. See Schmuck v. United States, 489 U.S. 705, 712, 109 S.Ct. 1443, 1448, 103 L.Ed.2d 734 (1989). Although the defendant need not have personally mailed the letter, the plaintiffs must establish "`1) that the defendant `caused the mailing' ... and 2) that the mailing was for the purpose of executing the scheme....'" McLaughlin v. Anderson, 962 F.2d 187, 191 (2d Cir.1992) (quoting United States v. Bortnovsky, 879 F.2d 30, 36 (2d Cir.1989)). Plaintiffs have failed to allege any facts to substantiate a claim that the NMDU mailing was made for the purpose of executing the fraudulent scheme.

In the complaint, plaintiffs assert that La Chance and Orlando initiated the conspiracy sometime after La Chance decided to run for election in 1990. Fourth Amended Complaint, at ¶ 49. However, plaintiffs do not allege that when the NMDU initiated the mailings in question, prior to La Chance's election, it was a party to the alleged...