The opinion of the court was delivered by: Jed S. Rakoff, United States District Judge.
Plaintiffs Motorola Credit Corporation ("Motorola") and Nokia
Corporation ("Nokia") are large, multinational companies that, together
with their affiliates, are involved, inter alia, in the sale of cellular
telephone equipment. The individual defendants — Kemal Uzan, Cem
Cengiz Uzan, Murat Hakan Uzan, Melahat Uzan, Aysegul Akay, and Antonio
Luna Betancourt — are members (or, in Betancourt's case, a close
associate) of a prominent Turkish family, the Uzans, who control various
Turkish businesses, including, inter alia, the three Turkish companies
named as corporate defendants here and a large Turkish cellular telephone
company called Telsim Mobil Telekomunikasyon Hizmetleri A.S. ("Telsim").
The plaintiffs allege, in essence, that the defendants, through a pattern
of fraud, extortion, and other unlawful activities, are in the process of
defrauding plaintiffs of more than $2.7 billion that plaintiffs lent to
Telsim. To prevent defendants from further diverting and depleting such
assets as might be available to repay this great sum, plaintiffs seek, in
addition to damages, extensive preliminary injunctive relief, including,
inter alia, the attachment of various New York properties and the deposit
in the registry of this Court of certain Telsim shares held by defendant
Standart Telekomunikasyon Bilgisayar Hizmetleri A.S. ("Standart Telekom")
and pledged as collateral for the loans.
Following extensive briefing and a lengthy evidentiary hearing
extending over six days, the Court, by orders issued May 9 and 10, 2002,
concluded that plaintiffs were entitled to the preliminary relief they
sought. This Opinion states the reasons for those rulings.
In the Second Circuit, a party seeking preliminary injunctive relief
must demonstrate, first, that it will suffer irreparable harm in the
absence of such relief, and, second, that either (a) there is a
likelihood that the movant will succeed on the merits of its underlying
claims or (b) there is a sufficiently serious question going to the
merits of those claims as to make them a fair ground for litigation,
coupled with a balance of hardships tipping decidedly in the movant's
favor. See, e.g., Random House, Inc. v. Rosetta Books LLC, 283 F.3d 490,
490 (2d Cir. 2002) (per curiam); Brenntag Int'l Chemicals, Inc. v. Bank
of India, 173 F.3d 245, 249 (2d Cir. 1999). Where, moreover, the movant
is seeking a "mandatory," rather than "prohibitory" injunction —
i.e., an injunction that will alter, rather than maintain the status quo
or that will provide the movant with relief that cannot be undone, see
Beal v. Stern, 184 F.3d 117, 122 (2d Cir. 1999) — the movant must,
in satisfying the aforementioned standard, either demonstrate a "clear"
or "substantial" likelihood of success or show that "extreme or very
serious damage" will result from a denial of the injunction. See, e.g.,
Beal, 184 F.3d at 122-23; Philip v. Fairfield Univ., 118 F.3d 131, 133
(2d Cir. 1997).
Although "[t]he distinction between mandatory and prohibitory
injunctions is not without ambiguities," Tom Doherty Assocs., Inc. v.
Saban Entertainment, Inc., 60 F.3d 27, 34 (2d Cir. 1995), the Court is
doubtful that what plaintiffs here seek is properly classified as
"mandatory" injunctive relief, since in essence they are simply seeking
to preserve the status quo by ensuring that certain assets otherwise
available to satisfy a judgment but threatened with being dissipated are
— even if this means, in the case of the Telsim
stock owned by Standart Telekom, moving it into the Court's registry. But
even assuming arguendo that some of the injunctive relief here sought
could be viewed as "mandatory," the Court finds that plaintiffs satisfy
the heightened standard requisite thereto. In particular, the Court,
based in substantial part on its assessments of the credibility (or lack
thereof) of the parties' respective witnesses who testified at the
preliminary injunction hearing and the corresponding inferences (positive
or adverse, as the case may be) that the Court drew from those
assessments, finds that plaintiffs have clearly demonstrated that they
are substantially likely to succeed on the merits of their claims, and
have further demonstrated that very serious damage is likely to result if
the requested relief is not granted.*fn1
Plaintiffs first four causes of action allege violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO"),
18 U.S.C. § 1961 et seq. A threshold issue is whether injunctive
relief is available to a private plaintiff bringing a civil action under
RICO. The Second Circuit has never definitively ruled on the issue, but
the two other circuits that have squarely decided it are divided on the
result — see Religious Technology Center v. Wollersheim,
796 F.2d 1076 (9th Cir. 1986) (denying injunctive relief); NOW, Inc. v.
Scheidler, 267 F.3d 687 (7th Cir. 2001) (granting injunctive relief)
— and the Supreme Court recently granted certiorari in the latter
case to resolve the split, see Scheidler v. National Organization for
Women, Inc., — S.Ct. —, 2002 WL 172022 (U.S. Apr. 22, 2002).
While the instant Court would gladly avoid the issue until the Supreme
Court rules, that is not possible, for even though (as discussed infra)
Motorola has an independent entitlement to injunctive relief under its
state law claims, co-plaintiff Nokia has brought claims here only under
RICO and a certain percentage of the Telsim stock that plaintiffs seek to
transfer to this Court's registry is claimed as collateral by Nokia
alone. Thus, at least so far as Nokia's application for injunctive relief
is concerned, the issue of the availability of injunctive relief to a
private RICO plaintiff must be decided now.
In concluding that injunctive relief was not available to private RICO
plaintiffs, the Ninth Circuit in Wollersheim relied heavily on extended
inferences drawn from what the Seventh Circuit in Scheidler described as
mere "snippets of legislative history." Scheidler, 267 F.3d at 699. In
reaching the opposite result, the Seventh Circuit relied on what it
characterized as the "unambiguous statutory language" of the applicable
section of RICO, § 1964. Id. The present Court agrees with the result
in Scheidler, but for somewhat different reasons.
As even the court in Wollersheim recognized, the right to grant
injunctive relief in private civil actions in accordance with traditional
principles of equity jurisdiction is one of the equitable powers given to
federal courts by the Judiciary Act of 1789. See Wollersheim, 796 F.2d at
1083; see generally, Grupo Mexicano de Desarrollo, S.A.
v. Alliance Bond
Fund, Inc., 527 U.S. 308, 318-19 (1999). It would be extraordinary indeed
if Congress, in enacting a statute that Congress expressly specified was
to be "liberally construed to effectuate its remedial purposes," Pub.L.
NO. 91-452, § 904(a), 84 Stat. 947 (1970), intended, without expressly
so stating, to deprive the district courts of utilizing this classic
remedial power in private civil actions brought under the act. Whether or
not the language of § 1964 expressly confers this power as
"unambiguously" as the Seventh Circuit asserts, it nowhere expressly
denies courts this power in private civil actions, and thus the normal
presumption favoring a court's retention of all powers granted by the
Judiciary Act of 1789 prevails.
Furthermore, the Ninth Circuit's reading in Wollersheim of RICO's
legislative history is far too narrow and wooden. RICO was originally
conceived as a statute that would provide the Government, alone, with
both criminal and civil remedies, with the former set forth in what
became § 1963 and the latter in what became subsections (a) and (b)
of § 1964. See Sedima, S.P.L.R. v. Imrex Company, Inc., 473 U.S. 479,
487 (1985); see generally Jed S. Rakoff & Howard W. Goldstein (eds.),
RICO: Civil and Criminal Law & Strategy § 1.01 (1989) Specifically,
subsection (a) of § 1964 made express what was already inherent
— that in civil RICO actions, as in other civil actions, the
federal district courts have broad equitable powers. If anything,
subsection (a) extended the courts' equitable jurisdiction in civil RICO
actions beyond what was granted by the Judiciary Act of 1789, while
subsection (b) gave the Government the right to bring such actions.
Since, however, the Government was not a victim and had not suffered
any loss, there was no reference to damages in the original version of
RICO that passed the Senate. It was only relatively late in the
legislative process that the House added an amendment to give victims of
racketeering activity a private right of action, and this amendment,
which was copied from the Clayton Act and provided for treble damages,
was tacked on to § 1964 in what is now subsection (a) thereof. See
Sedima, 473 U.S. at 487-88.
Taken overall, then, what clearly emerges from the legislative history
is that Congress intended to give private civil litigants a right to sue
under RICO and that, since the Act nowhere else specified damages, this
was expressly included in the amendment. But to go further and to suggest
that Congress in so amending § 1964 to add a private right of action
for damages thereby intended to deprive the district courts of applying
to private civil RICO cases the courts' equitable powers and jurisdiction
that subsection (a) of the Act so broadly affirmed is to push the
legislative history far beyond what it can reasonably support.
Accordingly, the Court concludes that the instant plaintiffs may seek
injunctive relief ...