by bribery of foreign officials. Other courts addressing the standing issue have similarly scrutinized plaintiffs' claims that they were the "true" targets of racketeering activities.
In Burdick, for example, the Second Circuit rejected the plaintiff's attempt to allege a more proximate injury by claiming that he was discharged as "an integral part of the illegal scheme, rather than in retaliation for reporting it." Burdick, 865 F.2d at 529. Instead, the Court found that a distinction between "preventive" and "retaliatory" discharge would serve no useful purpose in the standing context, since in either instance the injury to a plaintiff flows from the employer's decision to fire the employee rather than the predicate racketeering activity. Id. at 529-30. In Norman, similarly, the Second Circuit found that the plaintiffs lacked standing to assert their claims of retaliatory harassment because of a lack of "a causal connection between the prohibited conduct and plaintiff's injury," despite their efforts to allege a proximate injury by attempting "to make themselves victims of [the defendant's] scheme by alleging that [defendant] 'intended to ruin' anyone who, through the faithful performance of his duties, threatened [defendant's] ability to hide the true state of affairs." Norman, 873 F.2d at 636. In Miller, the plaintiff went so far as to allege a "Fraudulent Scheme Against Miller." The Court rejected this transparent attempt to establish standing, finding that Miller's conclusory self-description as the target of the frauds could not defeat the fact that his employer was the direct target of the racketeering activity and any injury Miller suffered in the form of lost commissions or salary would have "trickled down" indirectly. Miller, 745 F. Supp. at 938.
In sum, Sercenco's claimed injury--the loss of its distributorship--was only a by-product of the alleged scheme to secure contracts through bribery of foreign officials. The intended victim of this supposed scheme was not Sercenco but ElectroPeru or ElectroPeru's customers (either or both of which presumably would pay inflated prices), or GE's competitors (who would lose sales to GE). Sercenco's alleged injury directly and proximately resulted from GE's overt act of terminating the Contract, not GE's alleged racketeering activity. Therefore, Sercenco's injuries are too remote from the RICO violations to be deemed "proximate," and it lacks standing to pursue them under the RICO statute.
GE has moved to dismiss the claims asserted in the Amended Complaint with prejudice on grounds that Sercenco already has had an opportunity to amend the complaint, and further amendment would be futile. The Federal Rules instruct that a court shall "freely" grant leave to replead "when justice so requires." Fed. R. Civ. P 15(a); Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962). However, the Second Circuit has held that leave to amend need not be given if it would be futile for the district court to permit amendment. See Ruffolo v. Oppenheimer & Co., 987 F.2d 129, 131 (2d Cir. 1993) (per curiam); Cortec Indus. v. Sum Holding L.P., 949 F.2d 42, 50 (2d Cir. 1991), cert. denied, 503 U.S. 960, 112 S. Ct. 1561, 118 L. Ed. 2d 208 (1992); Health-Chem Corp. v. Baker, 915 F.2d 805, 810 (2d Cir. 1990). Also, dismissal with prejudice is proper when a complaint previously has been amended. Landy v. Heller, White & Co., 783 F. Supp. 125, 133 (S.D.N.Y. 1991). In response to GE's request that we dismiss with prejudice, Sercenco argues that the issue of whether the court should grant leave to further amend can only be intelligently addressed in light of the grounds on which the decision is based and the allegations, if any, that could be added to cure the defects in the complaint. Taking this position, Sercenco seeks deferment of consideration of whether the court should grant leave to amend further pending the outcome of this decision. However, we conclude that any attempt to replead the RICO claim based on GE's alleged fraudulent scheme to procure contracts through bribery of foreign officials would be futile because Sercenco cannot escape the preclusive effect of the "refusal to cooperate" line of cases typified by Hecht. Therefore, we see no reason to defer the amendment issue. Accordingly, the RICO claim is dismissed with prejudice.
II. Foreign Corrupt Practices Act
The FCPA, a criminal statute that prohibits domestic concerns from bribing foreign officials to assist such concerns in obtaining business, see 15 U.S.C.A. § 78dd-2(a)(1) (West Supp. 1996), provides no explicit private right of action. Sercenco argues that the FCPA should be construed to provide an implied private right of action for a sales representative that is subjected to coercion and extortion by a manufacturer pressuring it to commit violations of the FCPA.
In determining whether a private remedy is implicit in a statute not expressly providing one, several factors are relevant:
First, is the plaintiff "one of the class for whose especial benefit the statute was enacted," [i.e.,] does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? . . . Third, is it consistent with the underlying purpose of the legislative scheme to imply such a remedy for the plaintiff? . . . And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?
Cort v. Ash, 422 U.S. 66, 78, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975) (emphasis in original) (citations omitted). Although the question has not been answered yet by the Second Circuit, the few courts that have addressed the issue, applying the four-part Cort test, have concluded that no private right of action should be implied under the FCPA. See Citicorp Int'l Trading Co. v. Western Oil & Refining Co., 771 F. Supp. 600, 606-07 (S.D.N.Y. 1991) ("No private right of action exists under the FCPA."); Lamb v. Phillip Morris, Inc., 915 F.2d 1024, 1027-30 (6th Cir. 1990) ("None of the Cort factors supports . . . private right of action theory. . . ."), cert. denied, 498 U.S. 1086, 112 L. Ed. 2d 1048, 111 S. Ct. 961 (1991); McLean v. International Harvester Co., 817 F.2d 1214, 1219 (5th Cir. 1987) (holding that neither the language nor the legislative history of the FCPA indicates the congressional intent to create a private right of action). Applying the four-part Cort test below, we also decline to infer a private right of action under the FCPA.
With respect to the first factor, the FCPA primarily is intended to prevent bribery of foreign officials and to protect businesses from having competitors gain an advantage by offering such bribes. Citicorp, 771 F. Supp. at 606. Sercenco claims that GE violated the FCPA by bribing (or conspiring to bribe) foreign officials in order to secure business; however, it cannot be said that Sercenco, a distributor of GE (not its competitor), falls within the group for whose particular protection the FCPA was enacted. Furthermore, although Sercenco argues that it suffered injury for refusing to cooperate in GE's alleged scheme to secure business through bribery, this injury is too remote to place Sercenco within the group for whose "especial" benefit the FCPA was enacted.
As for the second factor, Sercenco identifies no legislative history indicating an intent to create a private right of action. The Ninth Circuit inferred, based in part on the absence of any mention of a private right of action in the conference report accompanying the final compromise bill passed by both Houses of Congress, "that Congress intended no such result." Lamb, 915 F.2d at 1029. We concur with Lamb's analysis. See Citicorp, 771 F. Supp. at 607 (following Lamb with respect to the second factor).
Sercenco asserts in conclusory fashion that "the critical component of the four-part test for the purposes of this motion is the third component--'whether creation of a private right would be consistent with the underlying purpose of the legislation. . . .'" Plaintiffs' Memorandum of Law in Opposition, at 59. Sercenco argues that it is essential to the underlying purpose of the FCPA that a distributor have recourse to a civil damages remedy under the FCPA when the distributor is pressured by a manufacturer to commit violations of the FCPA because manufacturers insulate themselves from the FCPA by tacitly coercing their distributors to pay bribes (and terminating distributors who refuse to give in to manufacturers' pressure to pay the bribes on their behalf). According to Sercenco, "if the distributor stands up to the manufacturer's pressure, it risks loss of its distributorship." Plaintiffs' Memorandum in of Law in Opposition, at 60.
As an initial matter, it is not clear that a manufacturer who truly coerces a distributor to pay a bribe in order to secure orders on its behalf has insulated itself from criminal liability under the FCPA. Furthermore, because subsections (e) and (f) of section 78dd-2 "evince a preference for compliance in lieu of prosecution, the introduction of private plaintiffs interested solely in post-violation enforcement, rather than pre-violation compliance, most assuredly would hinder congressional efforts to protect companies and their employees concerned about FCPA liability." Lamb, 915 F.2d at 1029-30. See Citicorp, 771 F. Supp. at 607 (following Lamb with respect to the third factor). We therefore conclude that the overall legislative scheme is at odds with an implied private right of action.
As for the fourth and final factor, regulation of bribery directed at foreign officials cannot be characterized as a matter traditionally relegated to state control. Lamb, 915 F.2d at 1030. In this respect, implying a private right of action under the FCPA--a statutory scheme aimed at activities ordinarily undertaken abroad--would not intrude upon matters of state concern. Id. However, Sercenco is not without alternative avenues to pursue its claims against GE: Sercenco can seek redress for its alleged injuries under one or more of the various state law claims asserted in the Amended Complaint.
Based on consideration of the four factors enumerated in Cort, we conclude, as has every other court that has addressed this issue, that no private right of action exists under the FCPA.
Sercenco's arguments in support of a contrary position are unconvincing. Sercenco urges the court to adopt the position that Congress enacted the FCPA for the "especial" benefit of distributors who are placed between a rock and a hard place by manufacturers who extort them into paying bribes in violation of the FCPA to procure orders without implicating the manufacturers. Sercenco has identified no authority in support of this fanciful reading of the FCPA, and has failed to refute or distinguish the well-reasoned cases that have repudiated the notion of an implied private right of action under the FCPA.
For the same reasons that we dismiss the RICO claim with prejudice, we dismiss also the FCPA claim with prejudice.
III. State Law Claims
Because we dismiss both federal claims asserted in the Amended Complaint, we decline to exercise supplemental jurisdiction over the state law claims. See 28 U.S.C. § 1367(c)(3); Morse v. University of Vermont, 973 F.2d 122, 127 (2d Cir. 1992).
For the foregoing reasons, defendants' motion to dismiss is granted. The RICO and FCPA claims are dismissed with prejudice. The remaining claims, arising under state law, are dismissed without prejudice.
July 17, 1996
White Plains, New York
William C. Conner
Senior U.S. District Judge