Summary
The Second Circuit affirmed dismissal of Official Publications’ Robinson-Patman Act and RICO claims, holding that the plaintiff had not shown antitrust injury and that the RICO claims were inadequately pleaded. The court reversed the denial of leave to replead the RICO claim and reversed Rule 11 sanctions imposed on the plaintiff, its attorney, and the law firm, remanding for further proceedings.
Topics
Practice areas
Questions Presented
- Whether Official suffered antitrust injury and had a sufficient causal connection between alleged price discrimination and its claimed damages to maintain a Robinson-Patman Act claim.
- Whether Official should have been granted leave under Federal Rule of Civil Procedure 15(a) to replead its RICO fraud allegations with the particularity required by Rule 9(b).
- Whether Kable could be both a RICO person and enterprise under 18 U.S.C. § 1962(a), notwithstanding the bar to such dual status under § 1962(c).
- Whether Rule 11 sanctions were warranted for Official's Robinson-Patman and RICO claims and its diversity-jurisdiction allegations.
Holdings
- Official was not entitled to proceed on its Robinson-Patman claim because its alleged damages resulted from Kable's allegedly improper discounts or breach of contract, not from discrimination among favored and disfavored wholesalers, and Official failed to establish the required causal connection between price discrimination and injury.
- A plaintiff whose newly asserted RICO fraud allegations are deficient under Rule 9(b), but who has not previously had an opportunity to replead with greater specificity, should ordinarily be permitted to amend under Rule 15(a), absent repeated failure to cure deficiencies or another reason making amendment inappropriate.
- Kable could not be both the RICO person and the RICO enterprise for purposes of a claim under 18 U.S.C. § 1962(c), so dismissal of the § 1962(c) claim against Kable was proper.
- The court declined to hold that Kable could never be both the RICO person and enterprise under 18 U.S.C. § 1962(a); a viable § 1962(a) claim might be possible, but the issue could not be determined without a well-pleaded complaint.
- Rule 11 sanctions were unwarranted because the Robinson-Patman theory was not patently frivolous given the unusual contractual pass-along arrangement, the RICO claim was being remanded for repleading, and the diversity-jurisdiction error did not warrant compensation where defendants' counsel apparently did not identify or litigate the offending pleading defect.
Key quotations
“Reduced to its essentials, the amended complaint states that pursuant to a longstanding contract, over a considerable period of time, Official received billing statements mailed by Kable which contained concealed charges, and Official paid the charges.” (668)
“Fed.R.Civ.P. 15(a) states that leave to amend a complaint “shall be freely given when justice so requires.”” (669)
“As we have stated previously, Rule 11 is violated when it is patently clear that a claim has absolutely no chance of success.” (670)
Factual background
Official Publications and Kable News Co. entered into distribution agreements under which Kable distributed Official's magazines and could grant certain wholesalers special allowances, with Official obligated to reimburse Kable. After receiving printouts showing the wholesalers, discount types, and amounts, Official suspected that Kable had granted unjustified allowances and sued. Official alleged that Kable's discounts violated the Robinson-Patman Act and that concealed charges in mailed billing statements supported a RICO claim.
Procedural history
Official Publications sued Kable News Co. based on alleged improper discounts and allowances under distribution agreements, asserting Robinson-Patman Act, RICO, and pendent state-law claims. The district court granted Kable's motion under Rules 12(c) and 56, concluding that diversity jurisdiction was lacking, Official lacked antitrust standing, and the RICO fraud allegations failed Rule 9(b); it also imposed monetary sanctions, later reduced to $48,638.61. The Second Circuit affirmed dismissal of the Robinson-Patman and RICO claims, reversed the denial of leave to replead the RICO claim and the sanctions award, and remanded.
Remand instructions
The case was remanded for further proceedings, including allowing Official to further amend its RICO claim and vacating the Rule 11 sanctions. The district court could review the entire pleading after submission of the second amended complaint.