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U.S. v. DISTRICT COUNCIL
November 20, 1991
UNITED STATES OF AMERICA, PLAINTIFF,
DISTRICT COUNCIL OF NEW YORK CITY AND VICINITY OF THE UNITED BROTHERHOOD OF CARPENTERS AND JOINERS OF AMERICA, FREDERICK W. DEVINE, PRESIDENT, JOHN R. ABBATEMARCO, FIRST VICE PRESIDENT, GEORGE J. ALBERT, SECOND VICE PRESIDENT, ROBERT J. CAVANAUGH, SECRETARY-TREASURER, PASCHAL MCGUINNESS, FORMER PRESIDENT, IRVING ZEIDMAN, FORMER FIRST VICE PRESIDENT, FRANCIS J.P. MCHALE, FORMER SECRETARY-TREASURER, ANTHONY SALERNO, A/K/A "FAT TONY", VINCENT DINAPOLI, LOUIS DINAPOLI, PETER DEFEO, ALEXANDER MORELLI, A/K/A "BLACK ALEX", LIBORIO BELLOMO, A/K/A "BARNEY", DEFENDANTS.
The opinion of the court was delivered by: Haight, District Judge:
MEMORANDUM OPINION AND ORDER
In this action the government invokes the civil RICO statute,
18 U.S.C. § 1964, to obtain injunctive relief against a labor
organization, certain of its present and former officers, and
The case is before the Court on certain defendants' motion to
dismiss the Supplemental Complaint. For the reasons set forth
below, the motion is hereby denied.
The District Council of New York City and Vicinity of the
United Brotherhood of Carpenters and Joiners of America
("District Council") is a labor organization that represents
about 22 local unions in the construction trade industry in New
York City and its vicinity. The District Council negotiates
collective bargaining agreements, implements and maintains
those agreements, handles labor disputes, grievances and
arbitrations on behalf of local unions and coordinates labor
relations matters with other unions. Supp. Complaint ¶ 6;
Affidavit of Robert G. Morvillo Dated November 12, 1990
("Morvillo Aff.") ¶ 3. The District Council's affiliated local
unions ("Local Unions") have voting rights and elect delegates
to the District Council based on the number of members in the
local. Even when a local member is elected to the District
Council, he is paid by the local union.
The District Council oversees a number of trust funds: the
New York City District Council of Carpenters Welfare Fund, the
New York City District Council of Carpenters Pension Fund, the
New York City District Council of Carpenters Vacation Fund, the
New York City District Council of Carpenters Annuity Fund, the
New York City District Council of Carpenters Apprenticeship,
Journeyman Retraining, Educational and Industry Fund, the New
York City District Council of Carpenters Supplemental Fund and
the Retirement and Pension Plan for Officers and Employees of
the New York City District Council of Carpenters and Related
Organizations ("District Council Benefit Funds"). Supp.
Complaint ¶ 8.
The District Council's officers, Frederick W. Devine, John R.
Abbatemarco, George J. Albert and Robert J. Cavanaugh, and
former officers Paschal McGuiness, Irving Zeidman, and Francis
J.P. McHale (the "Officer Defendants") who are defendants in
their individual and official capacities, are drawn from the
local unions.*fn1 Defendant Devine, who is now President and
who was a Vice President of the District Council since
approximately 1986, is also President of Carpenters Local 1456.
Defendant Abbatemarco, who is First Vice President of the
District Council, is also Vice President and Delegate of
Carpenters Local 257. Defendant Albert, who is Second Vice
President of the District Council, is also Financial Secretary
and Treasurer of Carpenters Local 348. Defendant Cavanaugh,
Secretary-Treasurer of the District Council, is also the
Delegate of Carpenters Local 740.
Defendant McGuinness, who is also the President of Carpenters
Local 608, was the President of the District Council from 1984
to 1991. Defendant Zeidman, who was a Vice President of the
District Council from approximately 1985 to 1991, is also the
President of Carpenters Local 2155. Defendant McHale, who was
the Secretary-Treasurer of the District Council from
approximately 1983 to 1991, is also the "Business Agent
Emeritus" of Carpenters Local 2287. Until about 1987, he had
Business Agent of Local 2287. Supp. Complaint ¶ 9.
The Supplemental Complaint alleges that defendants Anthony
Salerno, Vincent DiNapoli, Louis DiNapoli, Peter DeFeo,
Alexander Morelli and Liborio Bellomo (the "Individual
Defendants") hold or have held positions in the Genovese
Organized Crime Family, a criminal organization affiliated with
La Cosa Nostra, or "Mafia," or "Our Thing." Supp. Complaint
The government alleges that the District Council has
supervisory powers on all matters relating to the local unions.
The District Council enters into collective bargaining
agreements with employers in the New York City area and the
District Council holds and controls the District Council
Benefit Funds. The Supplemental Complaint alleges that "the
officers of the District Council are entrusted with, and have
ultimate power over, the fundamental contractual and statutory
rights of the union members." Supp. Complaint ¶ 18.
The plaintiff's Racketeer Influenced and Corrupt Organization
("RICO") claim rests on the allegation that the officers of the
District Council have abused their power by taking bribes from
employers, converting the collective bargaining agreements into
tools of extortion and working with organized crime figures who
have profited at the expense of the membership. The government
by such affirmative misconduct and by their
deliberate refusal to exercise their supervisory
powers, the officers of the District Council have
fostered a regime of corruption, extortion and
intimidation at all levels of the union throughout
New York City. This regime, as stated below, rests
on a pattern of racketeering activity in violation
of RICO. Supp. Complaint ¶ 19.
The government alleges that the District Council, its
constituent Local Unions and the District Council Benefit Funds
(the "District Council Enterprise") constitute an enterprise
under Title 18 U.S.C. § 1961(4), which has been engaged in, and
activities of which have affected, interstate commerce. Supp.
Complaint ¶ 20.
The government's First Claim for Relief, based upon 18 U.S.C. § 1962(b),
alleges that from the 1960s to the present,
defendants Anthony Salerno, Vincent DiNapoli,
Peter DeFeo, Alexander Morelli and Liborio
Bellomo, together with and aided and abetted by
defendants Paschal McGuinness, Irving Zeidman,
Frederick W. Devine, Francis J.P. McHale, George
J. Albert and others have unlawfully willfully and
knowingly acquired and maintained, directly and
indirectly, an interest in and control of the
District Council Enterprise, which has engaged in
and the activities of which have affected
interstate commerce, through a pattern of
racketeering activity as set forth below, in
violation of Title 18, United States Code 1962(b)
and 2. Supp. Complaint ¶ 21.
The charge of aiding and abetting is based on the allegation
[e]ach of the current and former District Council
officer defendants has aided and abetted each of
the racketeering acts set forth below which
occurred during his tenure as a District Council
officer by, at a minimum, refusing to take any
action to redress that racketeering act. The
District Council officer defendants have the
authority and obligation, both under the
applicable union constitution and bylaws and under
federal labor law, to investigate and discipline
union corruption. Supp. Complaint ¶ 22.
The Supplemental Complaint goes on to allege predicate
racketeering acts by the present and past officers of the
District Council, paragraphs 23-43, and predicate racketeering
acts by officers of the Local Unions, paragraphs 44-76.
The government's Second Claim for Relief alleges that the
officer defendants and the individual defendants have conspired
to violate Title 18 U.S.C. § 1962(b) in violation of Title
18 U.S.C. § 1962(d). The government realleges all of the previous
racketeering acts in support of its second claim. Supp.
Complaint ¶¶ 78-79.
The Third Claim for Relief alleges that the officer
defendants and the individual defendants have unlawfully
conducted and participated in the conduct of the District
Council Enterprise in violation of Title 18 U.S.C. § 1962(c)
and 2 through a pattern of racketeering activity consisting of
the acts alleged in paragraphs 23-76 of the Supplemental
Complaint. Supp. Complaint ¶ 80. The Supplemental Complaint
alleges that the current and former officer defendants aided
and abetted each of the listed racketeering acts
by, at a minimum, refusing to take any action to
redress that racketeering act. The District
Council officer defendants have the authority and
obligation, both under the applicable union
constitution and by-laws and under federal law, to
investigate and discipline union corruption. Supp.
Complaint ¶ 81.
The Fourth Claim for Relief alleges a conspiracy to violate
Title 18 U.S.C. § 1962(c), that is, to conduct and participate,
directly and indirectly, in the conduct of the District Council
Enterprise. The officer defendants and the individual
defendants are alleged to each have committed at least two of
the racketeering acts alleged in paragraphs 23-76 of the
Supplemental Complaint. Supp. Complaint ¶¶ 82-83.
The Supplemental Complaint requests preliminary injunctions
enjoining and restraining the Individual Defendants from
participating in any way in the affairs of the District Council
or any labor organization; enjoining and restraining the
Officer Defendants from committing any racketeering acts or
associating with organized crime; appointing a court liaison
officer to carry out District Council discipline and review the
actions of the Officer Defendants as they relate to the
District Council Benefit Funds; and enjoining and restraining
the members, officers and employees of the District Council
from interfering with the court liaison officer.
The permanent injunctions requested would restrain the
Individual and Officer Defendants in the same manner and would
also enjoin and restrain any defendants found to have violated
§ 1962 from participating in the affairs of the District
Council or any other labor organization; order new officer
elections at the District Council to be conducted by a trustee
appointed by the Court; empower the trustee to discipline union
members; enjoin and restrain any interference with the trustee;
and force any defendants who have violated § 1962 to disgorge
all proceeds of those violations. The government also prays for
a declaratory judgment that the District Council has been
controlled by organized crime and that the costs of any trustee
or trustees and of this suit be borne by the defendants.
When the new officers were elected in June 1991, while the
motion to dismiss was pending, the government applied for and
received leave to supplement the Complaint. The government
filed and served the Supplemental Complaint on July 2, 1991.
The Supplemental Complaint adds the new officers as defendants
and includes new allegations against defendant Albert but
otherwise does not differ from the original Complaint.
The District Council has submitted additional briefs
supplementing its motion to dismiss. In addition, defendant
Robert Cavanaugh has filed a motion to dismiss and joined the
previous motions to dismiss. Defendant Abbatemarco has entered
into an agreement to obey any orders of this Court and the
government has dismissed the Supplemental Complaint against him
without prejudice. Defendant Albert resigned his office after
being elected and is negotiating a consent judgment with the
government. Plaintiff's Memorandum in Opposition to Defendants'
Supplemental Motion to Dismiss ("Gov.Supp.Mem.") at 18, n. 13.
The motions to dismiss by the District Council, the Officer
Defendants and defendant Cavanaugh (collectively the
"Defendants") are fully briefed and ripe for decision.
I. The Rule 12(b)(6) Motions
Defendants move to dismiss the Supplemental Complaint under
Fed.R.Civ.P. 12(b)(6), which provides that a complaint can be
dismissed for "failure to state a claim upon which relief can
be granted." The defendants challenge the Supplemental
Complaint under Rule 9(b); contest aiding and abetting
liability as a matter of law; attack the pleading of RICO; and
dispute the validity of the Supplemental Complaint under the
United States Constitution.
A. The Standard for Civil RICO Pleading
In moving to dismiss under Rule 12(b)(6), the defendants
argue that regardless of the substantive allegations, civil
RICO suits should be judged by the pleading standards of Rule
9(b). The defendants argue that because of the prejudicial
impact of the filing of a RICO suit, a civil RICO pleading must
be judged by the stricter pleading standards of Fed.R.Civ.P.
9(b). The government replies that unless the underlying conduct
sounds in fraud, a RICO suit does not have to comply with Rule
9(b) and only has to comply with Rule 8(a).
The government is correct in arguing that the Supplemental
Complaint in this case should be judged by the standards of
Rule 8(a). Fed.R.Civ.P. 9(b) provides that "In all averments of
fraud or mistake, the circumstances constituting fraud or
mistake shall be stated with particularity." Rule 8(a) provides
that pleadings shall contain "a short and plain statement of
the claim showing that the pleader is entitled to relief." The
Second Circuit has recently held that Rule 9(b) does not on its
face govern the pleading of a RICO conspiracy, which should be
judged by the standards of Rule 8(a). See Hecht v. Commerce
Clearing House, 897 F.2d 21, 26 n. 4 (2d Cir. 1990) (citing
Rose v. Bartle, 871 F.2d 331, 366 (3d Cir. 1989) (RICO
conspiracy pleading properly judged under Rule 8(a)).
Defendants argue that other courts, some in this district,
have held that all RICO suits must comply with the
particularity requirements of Rule 9(b). See Plount v. American
Home Assur. Co., Inc., 668 F. Supp. 204 (S.D.N.Y. 1987) and
Philan Insurance Ltd. v. Frank B. Hall & Co., Inc., 712 F. Supp. 339
(S.D.N.Y. 1989). However, a close examination of Philan
reveals that the court there only held that
where predicate acts for RICO sound in fraud, those acts must
be pleaded in conformity with Rule 9(b). Philan, 712 F. Supp. at
342. The court in Plount held that because of the danger to
reputation inherent in RICO suits, a civil RICO complaint
should be subject to the heightened pleading requirements of
Rule 9(b). Plount, 668 F. Supp. at 206. However, Judge Sweet
took that step because of the "`flood of cases under the RICO
label which have nothing at all to do with organized crime as
it is understood commonly or was understood by Congress at the
time of the enactment of the statute.'" Id. (citing and quoting
Terra Resources I v. Burgin, 664 F. Supp. 82 (S.D.N.Y. 1987)).
The allegations in this case, which must be taken as true on
this motion to dismiss, have a great deal to do with organized
crime as it is generally understood and specifically with the
influence of organized crime on organized labor.
District courts which have considered the question of the
civil RICO pleading standard in the context of labor
racketeering and organized crime have held that those
complaints should be judged under Rule 8(a). In holding that
the government's civil RICO complaint alleging corruption and
organized crime influence at the Teamsters union should be
judged by the standards of Rule 8(a) and not Rule 9(b), Judge
Edelstein said that this type of complaint "is not the typical
private civil RICO action which is essentially a fraud claim
dressed up as a racketeering action." United States v.
International Brotherhood of Teamsters, 708 F. Supp. 1388, 1396
(S.D.N.Y. 1989). Despite arguments by the defendants that RICO
suits carry a special stigma, Judge Glasser of the Eastern
District explicitly refused to extend Rule 9(b) to all
non-fraud RICO complaints. See United States v. Bonanno
Organized Crime Family, 683 F. Supp. 1411, 1428 (E.D.N.Y. 1988),
aff'd, 879 F.2d 20 (2d Cir. 1989); see also Executive Photo v.
Norrell, 756 F. Supp. 798, 801 (S.D.N.Y. 1991). At least in the
context of a civil RICO case involving organized crime, the
holdings in International Brotherhood of Teamsters and Bonanno
Organized Crime Family are more applicable here than those in
Philan and Plount.
The Supplemental Complaint here is more appropriately judged
by the standards of Rule 8(a). As the Second Circuit noted in
Hecht, 897 F.2d at 26 n. 4, Rule 9(b) is facially concerned
only with pleadings concerning "fraud or mistake." As the
predicate acts here do not concern fraud and are clearly
related to organized crime, there is no reason to impose the
heightened pleading requirement of Rule 9(b). Accordingly, the
Supplemental Complaint in this case should be judged by the
notice standards of Rule 8(a).
I now consider the standards governing a motion to dismiss
under Rule 12(b)(6). While "[a] complaint's insufficiency under
Rule 8(a) may provide the basis for a motion to dismiss under
Rule 12(b)(6), Fed.R.Civ.P.," Bonanno Organized Crime Family,
683 F. Supp. at 1428, the trial court's function "is merely to
assess the legal feasibility of the complaint, not to assay the
weight of the evidence which might be offered in support
thereof." Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir.
1980). "[T]he 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). Consideration of a
motion to dismiss the complaint must focus on the allegations
contained on the face of the complaint. Ryder Energy
Distribution v. Merrill Lynch Commod., 748 F.2d 774 (2d Cir.
1984). "On a motion to dismiss, a court must read the complaint
generously, and draw all inferences in favor of the pleader."
Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989).
The district court should not grant a Rule 12(b)(6) motion
unless 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] Rule 12(b)(6) motion to
dismiss need not be granted nor denied in toto but may be
granted as to part of a complaint and denied
as to the remainder." Decker v. Massey-Ferguson, Ltd.,
681 F.2d 111, 115 (2d Cir. 1982).
B. The Duty of The Officer Defendants
The Officer Defendants contend that the Supplemental
Complaint fails to allege a cognizable legal duty that they
violated by "refusing to take any action to redress [the]
racketeering act[s]" they allegedly aided and abetted. The
Supplemental Complaint alleges that:
The District Council officer defendants have the
authority and obligation, both under the
applicable union constitution and by-laws and
under federal labor law, to investigate and
discipline union corruption. Supp. Complaint ¶ 22.
Defendants contend that this allegation is insufficient to
establish aiding and abetting liability for the predicate RICO
acts. Defendants argue that the allegation fails to establish
any affirmative assistance of the acts allegedly aided and
abetted and so fails as a matter of law to state a claim. In
addition, the defendants maintain that principles of agency and
federal labor law prevent a union from being held liable for
actions that did not further the interests of the union.
In a civil RICO suit, the criminal standard has been applied
in judging aiding and abetting liability. In United States v.
Local 560 of International Brotherhood, Inc., Etc.,
780 F.2d 267, 284 (3d Cir. 1985), cert. denied, 476 U.S. 1140, 106 S.Ct.
2247, 90 L.Ed.2d 693 (1986), the Third Circuit held that the
district court was correct in applying the criminal test when
judging aiding and abetting liability in a civil RICO suit.
To convict a defendant for criminal aiding and abetting, "`it
is necessary that a defendant in some sort associate himself
with the venture, that he participate in it as in something
that he wishes to bring about, that he seek by action to make
it succeed.'" United States v. Ginsberg, 758 F.2d 823, 832 (2d
Cir. 1985) (citing and quoting Nye & Nissen Corp. v. United
States, 336 U.S. 613, 619, 69 S.Ct. 766, 770, 93 L.Ed. 919
(1949)). Although an aider and abettor need not know all of the
details of a crime in order to be convicted of aiding and
abetting it, he must be shown to have known "the nature of the
substantive offense he furthers or promotes." United States v.
Sigalow, 812 F.2d 783, 786 (2d Cir. 1987).
The Second Circuit has stated the elements of aiding and
To convict a defendant of aiding and abetting the
government must prove (1) commission of the
underlying crime, (2) by a person other than the
defendant, (3) a voluntary act or omission by the
person charged as an aider and abettor, with (4)
the specific intent that his act or omission bring
about the underlying crime.
United States v. Zambrano, 776 F.2d 1091, 1097 (2d Cir. 1985)
(citation omitted). The government has alleged numerous acts of
racketeering committed by persons other than the Officer
Defendants and these allegations, if proved, satisfy the first
two elements of aiding and abetting. The Officer Defendants
dispute the omission element and the specific intent element.
The question is whether the ...