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AETNA CAS. & SUR. CO. v. LIEBOWITZ

July 11, 1983

THE AETNA CASUALTY AND SURETY COMPANY, Plaintiff, against STUART E. LIEBOWITZ, et al., Defendants.


The opinion of the court was delivered by: PRATT

MEMORANDUM AND ORDER

PRATT, C.J.:

 Plaintiff Aetna Casualty and Surety Company seeks an award of attorney's fees and costs pursuant to 18 U.S.C. § 1964(c). Aetna commenced this lawsuit in 1981 against defendant Liebowitz, an insurance broker, alleging that he had converted to his own use moneys paid to him by insurance applicants for the purpose of obtaining automobile insurance from Aetna through New York State's assigned risk pool. The complaint alleged that defendant's actions violated § 1962 of the Organized Crime Control Act of 1970, 18 U.S.C. §§ 1961-1968 (RICO), and that plaintiff was entitled to treble damages pursuant to 18 U.S.C. § 1964(c). In addition, Aetna alleged several pendent state claims, including breach of contract and conversion.

 Aetna moved for a preliminary injunction seeking an order requiring that defendant make all payments on policies assigned under the New York Automobile Insurance Plan by certified check or money order. After a hearing, the court granted the motion for preliminary relief. R. at 708-20 (December 8, 1981).

 After futher discovery, the parties reached a settlement whereby Liebowitz was permanently enjoined from participating in the insurance business in any manner and would pay Aetna $100,000 on or before October 21, 1982. Liebowitz consented to the entry of a judgment in favor of Aetna in the amount of $160,000, which Aetna agreed not to collect unless Liebowitz defaulted in his payment of the $100,000 amount. The settlement also provided that Aetna would apply for attorney's fees and costs but would not attempt to collect any fee award unless and until Liebowitz defaulted on his $100,000 payment. On October 23, 1982, Aetna notified the court that defendant had failed to make this payment, and Aetna is attempting to enforce its judgment in the amount of $160,000.In addition, by this motion Aetna seeks an award of attorney's fees.

 Aetna's position on the instant motion is that the court's grant of the preliminary injunction and the entry of the consent judgment under the terms of the settlement agreement each provide a basis for an award of attorney's fees under § 1964(c). Defendant argues that (1) since plaintiff, as a private party, was not entitled to a preliminary injunction under § 1964, the injunction does not provide a ground for a fee award, and (2) a private party may only obtain a fee award under § 1964(c) if it has recovered the treble damages provided for in that section.

 An examination of the language of 18 U.S.C. § 1964(c), as well as the legislative history of RICO, and the case law under analogous sections of the antitrust statutes leads the court to conclude that Aetna is not entitled to an award of fees in this case. However, before discussing the basis for this determination, the court turns first to the threshold issue of whether a private party may obtain a preliminary injunction under § 1964.

 Injunctive Relief Under § 1964.

 The civil remedy provision of RICO, 18 U.S.C. § 1964, provides in pertinent part:

 (a) The district courts of the United States shall have jurisdiction to prevent and restrain violations of section 1962 of this chapter by issuing appropriate orders, including, but not limited to: ordering any person to divest himself of any interest, direct or indirect, in any enterprise; imposing reasonable restrictions on the future activities or investments of any person, including, but not limited to, prohibiting any person from engaging in the same type of endeavor as the enterprise engaged in, the activities of which affect interstate or foreign commerce; or ordering dissolution or reorganization of any enterprise, making due provision for the rights of innocent persons.

 (b) The Attorney General may institute proceedings under this section. In any action brought by the United States under this section, the court shall proceed as soon as practicable to the hearing and determination threof. Pending final determination thereof, the court may at any time enter such restrianing orders or prohibitions, or take such other actions, including the acceptance of satisfactory performance bonds, as it shall deem proper.

 (c) 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 three-fold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.

 On its face, the section does provide for injunctive relief pending a final determination in suits brought by the attorney general. § 1964(b). Such relief, however, is unusual because the attorney general is not required to show irreparable injury or the inadequacy of a remedy at law. United States v. Cappetto, 502 F.2d 1351, 1358-59 (7th Cir. 1974), cert. denied, 420 U.S. 925, 43 L. Ed. 2d 395, 95 S. Ct. 1121 (1975).Early in the history of this litigation, the court indicated that § 1964(b) relief was not available where the plaintiff was a private party such as Aetna, and both parties now agree that § 1964(b) is applicable only to proceedings instituted by the attorney general.

 The preliminary injunction granted in this case, however, was entered after a finding that Aetna had met the traditional standards for obtaining a preliminary injuction in this circuit. Jack Kahn Music Co. v. Baldwin Piano & Organ Co., 604 F.2d 755, 758 (2d Cir. 1979); Caulfield v. Board of Education of the City of New York, 583 F.2d 605, 610 (2d Cir. 1978). The court found that plaintiff had established that it was suffering irreparable injury as a result of defendant's actions and that it had established a likelihood of success on its claim that defendant had violated 18 U.S.C. § 1962 through a pattern of racketeering activity, i.e., through at least two violations of the mail fraud statute, 18 U.S.C. § 1341. In addition, although it was not necessary to support the granting of the preliminary injunction, the court also found that the balance of hardships tipped decidedly in favor of Aetna. R. at 708-14. Although the court did not make specific findings with respect to Aetna's state law claims, there was ample evidence in the record to support a finding of likelihood of success on the merits of those claims as well. Because defendant did not appeal the ...


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