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U.S. v. DISTRICT COUNCIL

November 20, 1991

UNITED STATES OF AMERICA, PLAINTIFF,
v.
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 other individuals.

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.

BACKGROUND

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 been the 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 ¶¶ 11-17.

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 alleges that

  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 that

  [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 Supplemental Complaint describes additional predicate acts in connection with the government's allegation that it was a further part of the pattern of racketeering activity to delay and affect interstate commerce by extortion, in violation of Title 18 U.S.C. § 1951, by obtaining and attempting to obtain property: (a) in the form of the right of union members to free speech and representation rights of union members as guaranteed by Title 29 U.S.C. § 411; (b) in the form of the right of union members to loyal and responsible representation by union officers as guaranteed by Title 29 U.S.C. § 501(a); and (c) in the form of the right of union members to loyal and responsible representation by the trustees of the District Council Benefit Funds as guaranteed by Title 29 U.S.C. § 1104, 1106. The defendants allegedly carried out this extortion by using actual and threatened force, including fear of physical and economic harm in violation of Title 18 U.S.C. § 1951. The Supplemental Complaint lists acts of violence or threats of violence and economic harm or threats of economic harm. Supp. Complaint ¶ 77(a)-(h).

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.

In November 1990 the District Council and the original Officer Defendants moved to dismiss the original Complaint on the grounds that the original Complaint failed to establish a duty on the part of the District Council officers to redress the alleged violations and discipline Local Unions, violation of that duty constituting aiding and abetting on the government's theory; failed to plead adequately its allegations of aiding and abetting; failed to plead an enterprise; and failed to plead a pattern of racketeering activity. The District Council and the Officer Defendants also moved to dismiss the original Complaint on the grounds that RICO is unconstitutionally vague and violated the First Amendment. In addition, the District Council and the Officer Defendants moved to strike certain material from the original Complaint.*fn2

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.

DISCUSSION

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)).

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 abetting as:

  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 ...


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