Plaintiffs include thirteen individual electrical contracting companies (hereinafter "the corporate plaintiffs") who had been bound by the collective bargaining agreement with Local 363. They do not deny that they had also been members of the Contractors Association. The Fund, which now purports to be a trade association representing over one hundred electrical contractors, including the thirteen named plaintiffs, is also named as a plaintiff. Together, on June 18, 1993, they filed the present lawsuit pursuant to the Racketeering Influenced and Corrupt Organizations Act, the Sherman Antitrust Act, the Labor Management Relations Act, and state tort law, against Local 3, the Associations, and JIB.
Plaintiffs allege that sometime prior to January 1, 1975, and continuing to the present, all four defendants entered into an unlawful "conspiracy," the purpose of which, through racketeering acts of extortion, was to restrain trade, monopolize the market for electrical contracting in New York City, and drive plaintiffs out of business. Paragraphs 25 through 27 of the Second Amended Complaint (hereinafter "the complaint") allege that members of Local 3 employed arson, threats, vandalism, and other forms of violence and harassment against plaintiffs and other electrical contractors to secure contracts for Local 3 contractors at the expense of Local 363 contractors. They also allege that strikes, sit-ins and secondary boycotts were threatened and carried out. In some cases, the Local 3 members allegedly responsible for these activities are also identified as representatives of JIB. Although the complaint alleges that JIB, AECI, and NYECA were complicit in these activities, it does not detail their involvement, except to allege that all defendants were part of the "conspiracy."
Furthermore, plaintiffs allege that JIB has used the funds it receives from Local 3 contractors to mount a systematic campaign to harass them through litigation and administrative proceedings. Most of these activities have taken the form of "prevailing wage law" suits pursuant to N.Y. Lab. Law § 220. A final allegation does not appear in the complaint, but in plaintiffs' papers on the instant motion. Plaintiffs allege that defendants conspired illegally to fund JIB in violation of 29 U.S.C. § 186, creating a "slush fund" to support its litigation activities.
I. Summary Judgment Standard
Summary judgment is appropriate when there exists no genuine issue of material fact in a case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). A disputed material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248. The moving party bears the burden of demonstrating that no material fact is in dispute. Hurwitz v. Sher, 982 F.2d 778, 780 (2d Cir. 1992) (citing Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970)), cert. denied, 508 U.S. 912, 124 L. Ed. 2d 255, 113 S. Ct. 2345 (1993). In examining the record, the court must resolve all ambiguities against the movant and draw all favorable inferences in favor of the nonmovant. Adickes, 398 U.S. at 158-59, 90 S. Ct. at 1609; Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 465 (2d Cir. 1989). Once the moving party has made the necessary showing, mere allegations or denials by the non-moving party are insufficient to show that there exists a triable issue of fact. Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir. 1983). Further, "to defeat a motion for summary judgment a plaintiff cannot rely on 'conjecture or surmise,' Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.), cert denied,  U.S. , 112 S. Ct. 152 (1991), and 'must do more than simply show that there is some metaphysical doubt as to the material facts,' Matsushita Ileac. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986)." Heilweil v. Mount Sinai Hosp., 32 F.3d 718, 723 (2d Cir. 1994), cert. denied, 513 U.S. 1147, 115 S. Ct. 1095, 130 L. Ed. 2d 1063 (1995). The non-moving party must instead "produce 'significant probative evidence tending to support [its position].'" Id. (quoting United States v. Pent-R-Books. Inc., 538 F.2d 519, 529 (2d Cir. 1976), cert. denied, 430 U.S. 906, 51 L. Ed. 2d 582, 97 S. Ct. 1175 (1977)). "Summary judgment is ordinarily inappropriate where an individual's intent and state of mind are implicated." Ramseur, 865 F.2d at 465.
II. Threshold Determinations Affecting All Counts
A. Standing of the Fund
The Fund purports to be a trade association of electrical contractors, the purpose of which is "to promote and improve the lawful and legitimate business, welfare and interests of the electrical/construction industry." Second Am. Compl., P 1. Neither the defendant Associations nor JIB contest The Fund's standing as a plaintiff in this suit. JIB, in fact, agrees that the Fund is an unincorporated trade association of over 100 electrical contractors, of which each corporate plaintiff is a member. JIB Rule 3(g) Statement, PP 2-4.
As a trade association, the Fund would have standing to sue on behalf of all of its members if it met the following three-prong standard established by the Supreme Court:
Thus we have recognized that an association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.
Hunt v. Washington Apple Advertising Comm'n, 432 U.S. 333, 343, 53 L. Ed. 2d 383, 97 S. Ct. 2434 (1977); see also Self-Insurance Inst. v. Korioth, 993 F.2d 479, 484 (5th Cir. 1993); National Coal Ass'n v. Lujan, 298 U.S. App. D.C. 338, 979 F.2d 1548, 1551 (D.C. Cir. 1992); National Ass'n. of Pharmaceutical Mfrs. v. Ayerst Lab., 850 F.2d 904, 914 (2d Cir. 1988); American Booksellers Ass'n, Inc. v. Houghton Mifflin Co., 1995 U.S. Dist. LEXIS 2522, at *9-10, 1995-1 Trade Cas. (CCH) P70,931, No. 94 Civ. 8566 (S.D.N.Y. March 3, 1995).
Local 3, on the other hand, argues that the Fund lacks standing to bring this suit as a separate and individual plaintiff because it is not a representational, membership organization or a trade association, and further, has not alleged any direct injury to itself as required by Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S. Ct. 1311, 1318, 117 L. Ed. 2d 532 (1992); see also Manson v. Stacescu, 11 F.3d 1127, 1130 (2d Cir. 1993) (stating that RICO standing is limited "to plaintiffs whose injuries were proximately caused by the RICO predicate acts," citing Holmes). Rather, Local 3 claims, the Fund is only a trust fund of employer contributions created by the collective bargaining agreement between Local 363 and the Contractors Association, which should be terminated by virtue of the certification of Local 3 as the union with which the corporate plaintiffs must negotiate. Because plaintiff has not responded to the alleged lack of standing, Local 3 argues that it must be deemed uncontested that the Fund is a trust fund which lacks standing to sue for damages suffered by the contractors from whom it receives its contributions. Local 3 Reply Mem., at 4. If Local 3 had asserted in its Rule 3(g) Statement as an undisputed fact that the Fund is merely a trust fund that lacks standing in this case, and supported that assertion by evidence of record, and if the plaintiffs had still not responded, then the lack of standing would have been deemed admitted. General Electric v. New York State Dep't of Labor, 936 F.2d 1448, 1452 (2d Cir. 1991). However, Local 3 raised the issue only in its memorandum of law.
Standing should ordinarily not be presumed, and the burden rests upon the plaintiff to demonstrate standing. Autoinfo, Inc. v. Hollander Publishing Co., 1991 U.S. Dist. LEXIS 11019, at *2, No. 90 Civ. 6994, 1991-92 Trade Cas. (CCH) P 69, 529 (August 7, 1991) (dismissing RICO and Sherman Act claims for failure to establish standing) (citing Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 45, 48 L. Ed. 2d 450, 96 S. Ct. 1917 (1976) and Data Processing Serv. v. Camp, 397 U.S. 150, 153, 25 L. Ed. 2d 184, 90 S. Ct. 827 (1970)). In the case at bar, plaintiffs have made no independent attempt to establish the Fund's standing, despite Local 3's raising the issue, leaving the court to scour the record itself for evidence.
The collective bargaining agreement between Local 363 and the Contractors Association that was in force from July 1, 1986 through July 30, 1989, clearly indicates that the Fund is simply one of several funds to which the members of the Contractors Association agreed to contribute. JIB Ex. AT, at 35. Interestingly, the fund was established to promote the business, welfare and interests of the electrical industry, support various training and educational programs, and "stabilize and improve employer-union relations," goals similar to those articulated by defendants in establishing JIB and questioned by plaintiffs in this suit. See, e.g., Schuck Decl., P 8; JIB Ex. B, at 5. Although Anthony Cardillo claims to be the present "chairman" of the Fund, Cardillo Aff., P 1, the agreement refers only to trustees chosen by the employers who shall administer the fund and meet with union officials once every three months. The agreement does not suggest that the individual contractors are "members" of the Fund, or that there are employer "representatives" sitting on a Board of Directors, but only that each employer is obligated to make financial contributions to the fund. Indeed, because the Contractors Association was the representative trade association and multi-employer bargaining unit at the time the agreement was negotiated, see JIB Ex. AT, at 1, the Fund would have been redundant in such a role.
The Contractors Association itself apparently became largely defunct when all but six of its members withdrew from the organization just prior to the certification election in November, 1989. If the Fund filled this void by becoming an actual trade association and multi-employer bargaining representative for the Local 363 contractors at that time, plaintiffs have provided no evidence to that effect. Therefore, based upon the present record, the court finds that the Fund is not a representative trade association to which the standing requirements of Hunt could be applied, but is rather a fund of finances to be used for certain stated purposes. Because plaintiffs have offered no evidence that contributions to the fund suffered at any point as a result of any of the activities alleged in the Second Amended Complaint, the fund itself is not properly a plaintiff in this action. Further, even were the court to find that the Fund is a trade association, the record is devoid of evidence which would enable it to hold that the Fund meets all three elements of the Hunt standard. For these reasons, the Fund is dismissed as a plaintiff in this action for lack of standing to sue.
B. Hearsay in Plaintiffs' Affidavits
JIB argues that much of the evidence upon which plaintiffs rely in resisting summary judgment is inadmissible hearsay that must be discounted by the court. Plaintiffs counter that "the court may consider hearsay evidence in opposition to a motion for summary judgment." Pl.'s Mem. of Law, at 16. Plaintiffs' argument, however, fails fully to take account of JIB's argument and the applicable law.
Plaintiffs have submitted twenty affidavits in opposition to the motions for summary judgment allegedly based upon personal knowledge of various illegal acts by defendants Local 3 and JIB. Many of the statements made by the affiants, however, involve what someone told them about Local 3's conduct, or what someone told someone else regarding why certain electrical contracts were lost.
Such statements are classic examples of hearsay: out of court statements made by someone other than the witness offered for the truth of the matter asserted. Fed.R.Evid. 801(c).
In opposing summary judgment, "supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." Fed.R.Civ.P. 56(e). Thus, while a party opposing summary judgment generally need not prove its evidence in admissible form, e.g., Gache v. Town of Harrison, 813 F. Supp. 1037, 1052 (S.D.N.Y. 1993), it is equally well-settled that an affidavit that is solely based upon hearsay is a nullity in reviewing a summary judgment motion. Burlington Coat Factory Warehouse v. Esprit de Corp., 769 F.2d 919, 924 (2d Cir. 1985); Schwimmer v. Sony Corp. of America, 637 F.2d 41, 45 (2d Cir. 1980). Those portions of an affidavit that constitute hearsay may be ignored while other portions supported by admissible evidence may be considered. See Witter v. Abell-Howe Co., 765 F. Supp. 1144, 1147 (W.D.N.Y. 1991); First City Fed. Sav. Bank v. Bhogaonker, 684 F. Supp. 793, 798 (S.D.N.Y. 1988). The party offering the hearsay affidavit must make "a showing that admissible evidence will be available at trial." Burlington Coat Factory, 769 F.2d at 924; Spence v. Maryland Casualty Co., 803 F. Supp. 649, 664 (W.D.N.Y. 1992); Isaacs v. Mid America Body & Equip. Co., 720 F. Supp. 255, 256 (E.D.N.Y. 1989) ("The test is whether the affiant's, statements 'would be admissible in evidence under any rule of evidence or exception thereto, if the affiant was on the stand testifying.'") (quoting 6 J. Moore Federal Practice, P 56.22 at 56-752 to 56-755 (2d ed. 1988)).
Plaintiffs do not deny that many of the statements in the twenty affidavits are hearsay. Instead, plaintiffs argue that their hearsay evidence may be considered because there exists other evidence that is not hearsay, and that they have not relied solely upon hearsay evidence. The import of the cases, however, is that plaintiffs bear the burden of showing not just that unspecified "other" admissible evidence exists to support their claims, but that the very same statements currently presented in hearsay form either meet a hearsay exception or will be presented in admissible form at trial. Plaintiffs have not made such a showing.
Plaintiffs rely primarily on two cases for their argument that hearsay evidence may be considered in a motion for summary judgment: United States v. Private Sanitation Indus. Ass'n, 862 F. Supp. 861, 866-67 (E.D.N.Y. 1994) and Amendolare v. Schenkers Int'l Forwarders, Inc., 747 F. Supp. 162, 165-66 (E.D.N.Y. 1990). Both of these cases are distinguishable from the case at bar. First, neither case involved the admissibility of affidavits submitted in opposition to a motion for summary judgment. The evidence at issue in Private Sanitation was a memorandum prepared by a law firm. The evidence at issue in Amendolare was deposition testimony. Thus, neither case addressed the specific requirements of Rule 56(e). Second, the court in Amendolare made a specific finding that the deposition testimony at issue would be admissible under Rule 801(d)(2)(E), while the court in Private Sanitation concluded that the memorandum in question was at least potentially admissible at trial, and could therefore be considered in reviewing the summary judgment motion. Plaintiffs have not made any showing that the various statements that involve hearsay, and sometimes double hearsay, will be offered in an admissible form at trial, e.g., by calling the declarants to the stand or proving by some other admissible means that certain incidents occurred. Therefore, no statement falling into this hearsay category will be considered in reviewing the present motions for summary judgment.
III. Plaintiffs' RICO claims
Counts One and Two of the complaint allege violations of RICO. Civil damages under RICO are authorized by 18 U.S.C. § 1964(c), which provides that "any person injured in his business or property by reason of a violation of section 1962 [of Title 18] may sue therefor in any appropriate court of the United States and recover threefold the damages he sustains and the cost of his suit, including a reasonable attorney's fee." Thus, a private plaintiff who seeks damages under RICO must be able to show a violation of § 1962, as well as injury to business or property caused by such violation. First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d Cir. 1994), cert. denied, 513 U.S. 1079, 115 S. Ct. 728, 130 L. Ed. 2d 632 (1995); Hecht v. Commerce Clearing House, 897 F.2d 21 (2d Cir. 1990). Causation, for the purposes of § 1964, requires a showing of both actual or "but-for" causation and of proximate causation. Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S. Ct. 1311, 117 L. Ed. 2d 532 (1992) (requiring showing of proximate cause in civil action under § 1962(c)); see also Long Island Lighting Co. v. General Electric, 712 F. Supp. 292, 297 (E.D.N.Y. 1989) (requiring showing of proximate cause in civil action under § 1962(a)). The RICO violation must be a "substantial factor in the sequence of responsible causation," and a plaintiff's injury must be a reasonably foreseeable consequence. Hecht, 897 F.2d at 21.
In this case, plaintiffs have alleged three distinct violations of § 1962. Each of these allegations is addressed below in turn. For the reasons stated, the court finds no issues of material fact which preclude summary judgment for defendants on the RICO claims. The court therefore grants the motion for summary judgment as to Counts One and Two of the complaint.
A. § 1962(a) violation
Section 1962(a) of the RICO statute provides, in relevant part, as follows:
It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.
18 U.S.C. § 1962(a). This provision of RICO is primarily directed toward the investment of unlawfully acquired income in legitimate businesses, a practice frequently referred to as "money laundering." See Brittingham v. Mobil Corp., 943 F.2d 297, 303 (3d Cir. 1991); Galerie Furstenberg v. Coffaro, 697 F. Supp. 1282, 1288 (S.D.N.Y. 1988).
At the outset of this analysis, the court notes that the phrase "in which such person has participated as a principal" has consistently been interpreted to apply to both the "pattern of racketeering activity" and the "collection of unlawful debt" clauses of § 1962(a). See, e.g., Brady v. Dairy Fresh Products Co., 974 F.2d 1149, 1152 (9th Cir. 1992); Genty v. Resolution Trust Co., 937 F.2d 899, 908 (3d Cir. 1991); Haroco, Inc. v. American National Bank and Trust Co., 747 F.2d 384, 402 (7th Cir. 1984), aff'd, 473 U.S. 606, 87 L. Ed. 2d 437, 105 S. Ct. 3291 (1985); United States v. Loften, 518 F. Supp. 839, 851 n.19 (S.D.N.Y. 1981); see also Barry Tarlow, RICO: The New Darling of the Prosecutor's Nursery, 49 Fordham L.Rev. 165, 184-85 (1980) (concluding that legislative history of RICO "indicates that the modifying phrase was intended for the purpose of requiring participation as a principal in a pattern of racketeering activity"). The court is not aware of any reported decisions that hold otherwise. Nor do plaintiffs appear to contend that a person who receives income from a pattern of racketeering activity in which he does not participate as a principal can be liable for a violation of § 1962(a). See Pl. Mem. at 80-81.
Furthermore, because the essence of a § 1962(a) claim is the use or investment of racketeering income, the Second Circuit has held that a plaintiff seeking to recover under § 1962(a) must demonstrate injury resulting from the defendant's investment of racketeering proceeds, rather than from the underlying racketeering activity. Ouaknine v. MacFarlane, 897 F.2d 75, 83 (2d Cir. 1990). This rule has also been adopted by the Third, Sixth, Tenth, and District of Columbia Circuits, as well as several district courts in other circuits. See Danielsen v. Burnside-Ott Aviation Training Center, 291 U.S. App. D.C. 303, 941 F.2d 1220, 1229-30 (D.C. Cir. 1991); Craighead v. E.F. Hutton & Co., 899 F.2d 485, 494-95 (6th Cir. 1990); Rose v. Bartle, 871 F.2d 331, 356-58 (3d Cir. 1989); Grider v. Texas Oil and Gas Corp., 868 F.2d 1147, 1149-51 (10th Cir. 1991), cert. denied, 493 U.S. 820, 107 L. Ed. 2d 43, 110 S. Ct. 76 (1989). The Fourth Circuit and a minority of federal district courts follow a different rule, holding that plaintiff need show only injury caused by the racketeering activity itself. Busby v. Crown Supply, 896 F.2d 833, 836-840 (4th Cir. 1990). This court, however, is bound by the Second Circuit's decision in Ouaknine.
Thus, in order to prevail in a RICO action based on § 1962(a), plaintiffs must show that (1) each defendant received income from a pattern of racketeering activity in which it participated as a principal, (2) it invested such income in an enterprise engaged in interstate or foreign commerce, and (3) such investment actually and proximately caused the plaintiffs injury. Courts are split as to whether the defendant--the "person" in the language of the RICO statute--must be distinct from the "enterprise." Compare Long Island Lighting Co., 712 F. Supp. at 297 (holding that "person" and "enterprise" need not be separate entities for the purpose of pleading a § 1962(a) violation) with Rush v. Oppenheimer & Co., 628 F. Supp. 1188, 1196-97 (S.D.N.Y. 1985) (holding that "person" and "enterprise" must be distinct). Judge Wexler's position in Long Island Lighting Co. --which he reaffirmed in North Star Contracting Corp. v. Long Island Railroad, 723 F. Supp. 902, 907 (E.D.N.Y. 1989)--appears to be the majority rule. See Schofield v. First Commodity Corp. of Boston, 793 F.2d 28, 32 (1st Cir. 1986); Haroco, 747 F.2d at 402; Downing v. Halliburton & Associates, 812 F. Supp. 1175, 1179-80 (M.D. Ala. 1993), aff'd, 13 F.3d 410 (11th Cir. 1994). For the purposes of this motion, the court will assume that this view is correct, and that a defendant may violate § 1962(a) by investing racketeering proceeds in its own operations.
Under Ouaknine, however, the injury from such reinvestment must be distinct from the underlying racketeering activity. As numerous courts in this circuit have held, when a defendant derives income from a pattern of racketeering activity, and then reinvests the proceeds of that activity in its general business operations, it is the racketeering activity which injures the plaintiff, and not the "investment." See Update Traffic Systems v. Gould, 857 F. Supp. 274, 283 (E.D.N.Y. 1994); Morin v. Trupin, 832 F. Supp. 93, 98-99 (S.D.N.Y. 1993); Giuliano v. Everything Yogurt, 819 F. Supp. 240, 248-49 (E.D.N.Y. 1993); Williamson v. Simon & Schuster, 735 F. Supp. 565, 568 (S.D.N.Y. 1990); Vista Co. v. Columbia Pictures Industries, 725 F. Supp. 1286, 1299-1300 (S.D.N.Y. 1989); De Muro v. E.F. Hutton, 643 F. Supp. 63 (S.D.N.Y. 1986).
Applying these standards, the court concludes that the defendants are all entitled to summary judgment on plaintiffs' § 1962(a) claim. Plaintiffs' theory of liability under § 1962(a) is as follows:
When a Fund contractor fails to receive or is forced to surrender a contract to a Local 3 Contractor, the circle of the Conspiracy begins. First, the Local 3 Contractor, as a result of receiving a contract which it had not previously been awarded, earns money in the form of profits. Second, the Local 3 Contractor contributes .5% of its weekly wage payroll to JIB pursuant to an agreement it authorized the Associations to approve; hence the more business a Local 3 Contractor does, the more money is fed into JIB slush fund. Third, the Local 3 Contractor contributes .5% of its weekly wage payroll to the Associations pursuant to their Constitutions and By-Laws; hence, the more business a Local 3 Contractor does, the more money is fed into the Associations' coffers. Fourth, the Local 3 Contractor contributes a portion of the money to the benefit funds managed by JIB, which inures to the benefit of the Local 3 members. And finally, the Local 3 Contractor pays a portion of the money to Local 3 members hired to work on the contract.