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A. TERZI PRODUCTIONS v. THEATRICAL PROTECTIVE UNIO

April 17, 1998

A. TERZI PRODUCTIONS, INC. and ANTHONY TERZI, Plaintiffs, against THEATRICAL PROTECTIVE UNION, LOCAL NO. ONE, I.A.T.S.E., AFL-CIO; KEVIN McGARTY, INDIVIDUALLY AND AS PRESIDENT; RONALD LYNCH, INDIVIDUALLY AND AS JUNIOR BUSINESS AGENT, Defendants.


The opinion of the court was delivered by: SOTOMAYOR

ORDER AND OPINION

 Defendants Theatrical Protective Union, Local No. One, I.A.T.S.E., AFL-CIO ("Local One" or the "Union"), Kevin McGarty ("McGarty"), and Ronald Lynch ("Lynch"), move to dismiss causes of action two through seven of the Second Amended Complaint (the "Complaint"), pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons discussed below, the Court grants the motion in part, and denies it in part.

 BACKGROUND

 This action arises out of the Union's picketing of plaintiffs' job site with the conceded purpose of compelling plaintiffs to enter into a collective bargaining agreement. Plaintiff A. Terzi Productions, Inc. ("ATP") is a contractor of technical and production services. Plaintiff Anthony Terzi ("Terzi") was at all relevant times ATP's "principal." Defendants McGarty and Lynch, who are sued here both in their individual and representative capacities, were at all relevant times Local One's president and junior business agent, respectively.

 For purposes of this motion, the Court must assume that the facts alleged in the Complaint are true. See Walker v. New York, 974 F.2d 293, 298 (2d Cir. 1992). These facts are as follows. On September 12 and 13, 1996, approximately 200 of Local One's members picketed a televised fashion show held at the Armory in New York City to pressure ATP into a labor agreement. ATP had been hired by the show's producer (the "Producer") to set-up and dismantle the show's stage materials, among other things. At the time, ATP's employees were not members of Local One, nor did they seek or want Local One's representation. (Complaint P 18.)

 Local One's picketers demonstrated around-the-clock on both days of the show, bearing signs and distributing leaflets. (Complaint PP 19-20, 22.) The picketers also engaged in violent and disruptive behavior. They threatened the Producer with bodily harm and financial ruin to compel him to remove ATP from the show; they verbally assaulted ATP's and the Producer's employees and interfered with their ingress and egress at the show; and they made racist statements such as "ATP uses 'niggers.'" (Complaint PP 21-25.) Police officers were deployed to the picketing site to prevent violence, although plaintiffs do not allege that anyone was arrested. (Complaint P 22.)

 In addition, McGarty, Local One's president, made threatening calls to Terzi prior to and during the show warning that the Union would cause "problems" for plaintiffs at the show and at other job sites unless ATP immediately signed a collective bargaining agreement. (Complaint PP 26-27.) Upon information and belief, Local One and its agents also tried to persuade other businesses not to do business with ATP and Terzi. (Complaint P 28.)

 ATP signed a collective bargaining agreement with Local One on September 13, 1996 (the "Agreement"), directly following the show. (Complaint P 40.) However, ATP claims its was "forcibly coerced" into doing so by threats that, if the Agreement were not signed immediately, defendants would slash the tires of ATP's vehicles and prevent Terzi and ATP's employees from safely exiting the area. (Complaint PP 41-42.) Picketers placed nails under ATP's vehicles' tires for this purpose. (Complaint P 42.) However, once the Agreement was signed, all picketing and threatening conduct ceased. (Id.)

 The Complaint, which seeks recovery based upon seven causes of action, claims that plaintiffs have suffered substantial damages as a result of defendants' conduct, including the loss of present and future business opportunities, and harm to their good will and reputation within the industry. The first cause of action alleges that defendants engaged in illegal and unfair labor practices in violation of Section 303(b) of the Labor Management Relations Act of 1947 ("LMRA"), 29 U.S.C. § 187(b), and Section 8(b)4)(ii)(B) of the National Labor Relations Act ("NLRA"), 29 U.S.C. § 158(b)(4)(ii)(B). The second, third, fourth, sixth and seventh causes of action allege various state law tort claims against defendants, specifically, fraudulent inducement with respect to the Agreement, tortious inference with plaintiffs' contractual relationships, tortious inference with plaintiffs' business and prospective contractual relations, defamation, and prima facie tort. The fifth cause of action alleges that McGarty and Lynch, through Local One, engaged in a pattern of racketeering activity under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"), in violation of the Hobbs Act, 18 U.S.C. § 1951, the federal wire fraud statute, 18 U.S.C. § 1343, and the Travel Act, 18 U.S.C. § 1952. By the present motion, defendants seek to dismiss all but the first cause of action.

 DISCUSSION

 A district court's function on a motion to dismiss under Fed. R. Civ. P. 12(b)(6) is to assess the legal feasibility of the complaint. Kopec v. Coughlin, 922 F.2d 152, 155 (2d Cir. 1991). The 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, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974). Allegations contained in the complaint must be accepted as true construed favorably to the plaintiff. See Walker v. New York, 974 F.2d 293, 298 (2d Cir. 1992). Dismissal is warranted only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Ricciuti v. NYC Transit Authority, 941 F.2d 119, 123 (2d Cir. 1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957) (footnote omitted)).

 The Court will first address the adequacy of plaintiffs' state law claims and then turn to their RICO claim.

 I. Plaintiffs' State Claims

 A. Ratification

 Defendants argue that all of plaintiffs' state tort claims - counts two, three, four, six and seven of the Complaint - must be dismissed as against Local One because the Complaint does not adequately allege that Local One's members unanimously authorized or ratified the alleged tortious conduct after having actual notice, as required by the holding of Martin v. Curran, 303 N.Y. 276, 101 N.E.2d 683 (1951).

 In Martin, the New York Court of Appeals held that the officers of the National Maritime Union, an unincorporated association, were not liable for the unlawful acts of some of its union members because plaintiffs failed to plead and were unable to establish "that the individual members of the union authorized or ratified the tort complained of." Id., 303 N.Y. at 280, 101 N.E.2d at 684. The Court stated:

 
A voluntary, unincorporated membership association is neither a partnership nor a corporation. It is not an artificial person, and has no existence independent of its members. A part of the members of a voluntary organization cannot bind the other without their consent before the act which it is claimed binds them is done, or they, with full knowledge of the facts, ratify and adopt it.

 Id., 303 N.Y. at 280, 101 N.E.2d at 685 (internal citations omitted).

 The Court of Appeals in Martin also concluded that N.Y. Gen. Ass'n Law § 13 (McKinney 1994), which permits suits to be brought against the officers of an unincorporated association (such as a labor union) in their representative capacity, did not alter the unanimous authorization or ratification requirement. *fn1" The Court explained that § 13 was not meant to effect a substantive change in the law of associational liability but rather only simplified service of process by eliminating the need to join every member of the union in an action. Thus, Martin interpreted § 13 as a mere procedural tool and held that where association officers are named as representative defendants, the plaintiff must still allege and prove the individual liability of each member of the association. Id., N.Y. at 281, 101 N.E.2d at 685.

 This Court acknowledged in Modeste v. Local 1199, Drug, Hospital, and Health Care Employees Union, 850 F. Supp. 1156, 1166 (S.D.N.Y.), aff'd, 38 F.3d 626 (2d Cir. 1994), that "the Martin rule makes it very difficult for a plaintiff to maintain a cause of action against an unincorporated labor union in the State of New York." See also Jund v. Town of Hempstead, 941 F.2d 1271, 1281 (2d Cir. 1991) (noting that, given the large size of many unions "and the unlikelihood that a formal vote would be taken to authorize patently illicit activity," Martin 's requirement of unanimous authorization or ratification is "a virtually impossible burden to meet").

 While often criticized, the Martin rule has been consistently followed and remains good law. See People v. Newspaper and Mail Deliverers' Union of New York and Vicinity, 649 N.Y.S.2d 760, 768, 770, 170 Misc. 2d 790, 802, 805 (Sup. Ct. New York County 1996) (noting that, in contrast to federal law, New York "still adheres" to the rule established in Martin "limiting union liability to two situations: the authorization or the ratification of conduct by the union membership"); Building Indus. Fund v. Local Union No. 3, Int'l Bhd. of Elec. Workers, AFL-CIO, 992 F. Supp. 192, 1996 U.S. Dist. LEXIS 21842, 1996 WL 935625 at *2 (E.D.N.Y. 1996) (recognizing the Martin rule's continuing vitality in New York); Purnell v. Diesso, 1996 U.S. Dist. LEXIS 915, 1996 WL 37770 at *3 n.2 (S.D.N.Y. Jan. 21, 1996) (dismissing plaintiff's claim against union for infliction of emotional distress under Martin rule); R.M. Perlman Inc. v. New York Coat, Suit, Dresses, Rainwear & Allied Workers' Union Local 89-22-1, 789 F. Supp. 127, 132 (S.D.N.Y. 1992) (collecting state cases evincing Martin rule's broad application); Modeste, 850 F. Supp. at 1163 n.5 (same); Jund, 941 F.2d at 1278 n. 1, 1281. See also Vincent C. Alexander, Practice Commentaries to McKinney's C.P.L.R. § 1025 (1997) (citing Martin for proposition that "liability lies against an [unincorporated] association and its individual members only in narrow circumstances"). *fn2"

 Turning to the instant case, the Complaint alleges that "each member of defendant Local One authorized and ratified the tortious acts of defendants McGarty and Lynch by approving the Agreement that plaintiffs ATP and Terzi were coerced into signing." *fn3" (Complaint PP 44, 53, 61, 98, 107.) Defendants argue that this curt pleading is insufficient under the Martin rule to sustain state tort claims against the Union. I agree.

 Plaintiffs' conclusory allegation that Local One's members "ratified the tortious acts of defendants . . . by approving the Agreement" wants this Court to assume that simply because Local One's members approved the Agreement, they necessarily knew of and ratified McGarty's and Lynch's allegedly tortious conduct. Such a leap finds no support in the Complaint's allegations. Under basic agency principles, ratification of another's actions requires "full knowledge [of] . . . the specific acts in question." Martin, 303 N.Y. at 282, 101 N.E.2d at 686. See also New York State Medical Transporters Ass'n v. Perales, 77 N.Y.2d 126, 131, 564 N.Y.S.2d 1007, 1010, 566 N.E.2d 134, 137 (1990) ("ratification of an agent's acts requires knowledge of the material facts concerning the allegedly binding transaction"); Monarch Ins. Co. v. Insurance Corp. of Ireland Ltd., 835 F.2d 32, 36 (2d Cir. 1987) ("ratification requires acceptance by the principal of the benefits of an agent's acts, with full knowledge of the facts. . . .") (applying New York law); 2 N.Y. Jur.2d Agency § 174 (ratification is possible only if one has "knowledge of the act and opportunity to dissent or repudiate").

 Here, plaintiffs have not alleged that Local One's members had any knowledge, let alone "full knowledge," of the allegedly tortious conduct of the picketers or their union principals when they approved the Agreement. For instance, the Complaint does not allege that each and every one of Local One's members had full knowledge of the alleged death threats made to the Producer, of the content of McGarty's phone calls to Terzi, or of the allegedly defamatory statements made by the picketers. Yet this is precisely what plaintiffs need to allege to meet Martin 's stringent ratification requirement for union liability. The bald allegation that union members signed the Agreement and therefore ratified the conduct falls far short of the requisite pleading standard. Similarly in Martin, where the plaintiff sued for libelous statements published in a union's newspaper, the Court dismissed the claim against the union, finding that the mere allegation that the union had published the newspaper and circulated it to union membership fell "far short of asserting that the union members themselves authorized or ratified the particular libels." 303 N.Y. at 280, 101 N.E.2d at 684-85. See also Stefania v. McNiff, 49 Misc. 2d 480, 483, 267 N.Y.S.2d 854, 858 (Sup. Ct. Queens County 1966) (defamation claim against union dismissed where record did not show that libelous letter by union's president was authorized or ratified by entire union membership).

 The Complaint is also deficient in that, while alleging that union members ratified "the tortious acts of . . . Lynch," it does not specify a single tortious act by Lynch. Plaintiffs thus improperly want this Court to assume that Local One's members knew of and unanimously ratified acts which the Complaint does not even identify. Furthermore, although the Complaint alleges that numerous tortious acts were committed by McGarty and Lynch in connection with the picketing, plaintiffs have made no effort to allege that union members knew of and ratified each specific act, as required by New York law. See N.Y. Jur.2d § 177 ("the ratification of one unauthorized act is not the ratification of another and entirely distinct act").

 Accordingly, the Court hereby dismisses plaintiffs' state tort claims -- causes of action two, three, four, six and seven -- as against Local One. Under the Martin rule, these claims may be maintained (if at all) against McGarty and Lynch in their individual capacities only.

 B. Fraudulent Inducement

 Defendants further argue that plaintiffs' second cause of action, for fraudulently coercing ATP to enter the Agreement, is preempted by LMRA § 301(a), 29 U.S.C.A. § 185(a), the federal law that gives district courts subject matter jurisdiction over "suits for violation of contracts between an employer and a labor organization."

 Before the Court can determine whether § 301(a) preempts plaintiffs' state law fraudulent inducement claim, the Court must first determine whether challenges to labor agreements based on fraudulent inducement are even cognizable under § 301(a). This very question, which has been answered differently by Circuit courts around the country, *fn4" is now being considered by the Supreme Court in United Automobile, Aerospace and Agric. Implement Workers of Am. v. Textron Lycoming Reciprocating Engine Div., 117 F.3d 119 (3d Cir.), cert. granted, U.S. , 118 S. Ct. 439 (1997). The Supreme Court heard oral argument in Textron on February 23, 1998, but has not yet issued its decision in the case.

 There is no reason for this Court to decide this legal question prior to the Supreme Court's decision in Textron. Neither party will be harmed by the delay because plaintiffs' action is going forward in any event on the Complaint's first cause of action. Accordingly, the Court reserves decision on defendants' motion to dismiss the second cause of action of the Complaint pending the outcome of Textron. *fn5"

 C. Interference with Contractual Relations

 Plaintiff's third cause of action alleges that, to pressure plaintiffs into entering a labor agreement with Local One, defendants "intentionally sought to interfere with plaintiff ATP's performance of its contractual obligations to the Producer by . . . using verbal threats and abusive language to intimidate the Producer and thereby to unlawfully persuade the Producer to discontinue his business relationship with plaintiff ATP." (Amended Complaint P 50.) Plaintiffs further allege that, upon information and belief, Local One's agents "made death threats to the Producer . . . to frighten the Producer into breaching his contractual relationship with plaintiff ATP." (Amended Complaint P 51.)

 Defendants correctly argue that these allegations do not state a claim for tortious interference with contractual relations under New York law for a very simple reason: plaintiffs have not alleged that the Producer or ATP actually breached their contract with one another.

 A claim for tortious interference with contractual rights "requires the existence of a valid contract between the plaintiff and a third party, defendant's knowledge of that contract, defendant's intentional procurement of the third-party's breach of the contract without justification, actual breach of the contract, and damages resulting therefrom." Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 424, 646 N.Y.S.2d 76, 82, 668 N.E.2d 1370, 1375 (1996) (emphasis added) (citing Israel v. Wood Dolson Co., 1 N.Y.2d 116, 120 151 N.Y.S.2d 1, 134 N.E.2d 97 (1956)). If no actual breach is alleged, the claim must be dismissed. See NBT Bancorp Inc. v. Fleet/Norstar Financial Group, Inc., 87 N.Y.2d 614, 620-624, 641 N.Y.S.2d 581, 584-586, 664 N.E.2d 492, 495-497 (1996) (absent an allegation of breach, a plaintiff cannot sustain a claim for interference with contractual relations, no matter how unlawful the defendant's conduct may have been); Baylis v. Marriott Corp., 906 F.2d 874, 877 (2d Cir. 1990) ("Under traditional principles of New York law, a party may not recover for tortious inducement of a breach of contract without proving that the contract has been breached."); Fonar Corp. v. Magnetic Resonance Plus, Inc., 957 F. Supp. 477, 481 (S.D.N.Y. 1997) (rulings of New York Court of Appeals and Second Circuit have consistently held that to establish claim for tortious interference with contractual relations, a third party must breach the contract after being induced to do so by the defendant).

 Here, there is no allegation in the Complaint that either ATP or the Producer breached any contract between them because of defendants' actions. To the contrary, it is clear from the face of the Complaint that defendants' alleged death threats to the Producer did not result in ATP's removal from the fashion show. Nor does the Complaint allege ...


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