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MOTOROLA CREDIT CORPORATION v. UZAN

May 20, 2002

MOTOROLA CREDIT CORPORATION AND NOKIA CORPORATION, PLAINTIFFS,
V.
KEMAL UZAN, CEM CENGIZ UZAN, MARAT HAKAN UZAN, MELAHAT UZAN, AYSEGUL AKAY, ANTONIO LUNA BETANCOURT, UNIKOM ILETISM HIZMETLERI PAZARLAMA A.S., STANDART PAZARLAMA A.S., AND STANDART TELEKOMUNIKASYON BILGISAYAR HIZMETLERI A.S., DEFENDANTS.



The opinion of the court was delivered by: Jed S. Rakoff, United States District Judge.

  OPINION

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).

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 ...


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