Deck v. Engineered Laminates

349 F.3d 1253 (10th Cir. 2003) · United States Court of Appeals for the Tenth Circuit · November 17, 2003 · No. No. 02-3100

Summary

This Tenth Circuit opinion reverses a district court's dismissal of a plaintiff's civil RICO claim on judgment on the pleadings. The court holds that witness tampering in state court and abusive litigation do not qualify as RICO predicate acts, but mail and wire fraud do. It further finds that the plaintiff adequately alleged injuries to his business and property, including the loss of a cause of action and restrictions on competition due to fraudulently induced settlement agreements.

Court
United States Court of Appeals for the Tenth Circuit
Writing for the Court
Hartz, Circuit Judge; Barrett, Senior Circuit Judge; Brorby, Senior Circuit Judge
Jurisdiction
Federal
Decision date
November 17, 2003
Docket number
No. 02-3100
Procedural posture
Plaintiff appealed the district court's dismissal with prejudice of his civil RICO claims on judgment on the pleadings under Federal Rule of Civil Procedure 12(c).
Standard of review
De novo review of a ruling on a motion for judgment on the pleadings under Rule 12(c). The court accepts well-pleaded allegations as true and construes them in the light most favorable to the plaintiff; dismissal is proper only when the plaintiff can prove no set of facts entitling him to relief.
Precedential value
Published and precedential
Parties
Brent Deck v. Engineered Laminates, Keith Illig, Elkin McCallum, KHI, Inc., Excel Laminates, Inc., Joan Fabrics, Inc., Joan Automotive Industries, Inc., Joan Laminates, Inc.
Disposition
reversed_and_remanded

Topics

motion for judgment on the pleadingscommercial litigationstandingcivil procedurestatutory interpretation

Practice areas

commercial litigationcivil procedureRICOstatutory interpretation

Questions Presented

  1. Whether the complaint adequately alleged RICO predicate acts based on witness tampering in a state-court proceeding.
  2. Whether abusive or meritless litigation can constitute extortion under 18 U.S.C. § 1951 and a RICO predicate act.
  3. Whether the alleged mail and wire fraud adequately pleaded injury to Deck's business or property for purposes of civil RICO standing.
  4. Whether Deck's RICO claim was unripe because he had not yet obtained a judgment or established that a contract judgment would go unsatisfied.
  5. Whether dismissal on the pleadings was proper under Federal Rule of Civil Procedure 12(c).

Holdings

  1. Witness tampering under 18 U.S.C. § 1512 is actionable only when it occurs in an official proceeding, and § 1515(a)(1) defines that term to include only federal proceedings. Therefore, witness tampering in a state judicial proceeding is not a RICO predicate act.
  2. Allegations that defendants threatened and pursued meritless or abusive litigation, even through fraudulent pleadings or false testimony, do not state extortion under 18 U.S.C. § 1951 and therefore do not constitute a RICO predicate act.
  3. The complaint's allegations that defendants used mail and wire communications to induce Deck to enter a settlement agreement and later misrepresented that Engineered Laminates no longer existed adequately alleged mail and wire fraud as potential RICO predicate acts.
  4. Deck adequately alleged injury to his business or property because the alleged fraud induced him to relinquish causes of action and to restrict his ability to compete, and because a false statement caused him to delay enforcing his contractual right to receive settlement payments.
  5. The RICO claim was ripe even though Deck had not yet obtained a judgment on his breach-of-contract claim or shown that a judgment would go unsatisfied, because his separate alleged injuries from being fraudulently induced to release claims and restrict competition did not depend on his inability to recover fully on the contract.

Key quotations

“We hold that witness tampering in a state-court proceeding is not a RICO predicate act.” (¶ 3)
“Comfortable that the adjective "wrongful" in the extortion statute was not intended to apply to litigation, we hold that Plaintiff's allegations of bad-faith litigation do not state the predicate act of extortion.” (¶ 21)
“Likewise, fraud, as alleged in this case, that causes one to relinquish a cause of action arising out of his business is an injury to "business or property."” (¶ 28)

Factual background

Deck, a former employee of Engineered Laminates, competed with the company after his employment ended. Engineered Laminates sued him in Kansas state court, and the parties settled in 1994; Deck alleged that defendants fraudulently induced him to release counterclaims and accept a settlement that restricted his competition, while intending to transfer the company's assets and avoid future payment obligations. Engineered Laminates later defaulted on the final $15,000 in settlement payments, and Deck alleged that defendants used mail and wire fraud, witness tampering, and abusive litigation to cause injury to his business or property.

Procedural history

Deck sued the defendants in federal court asserting substantive and conspiracy claims under RICO, along with state-law claims. The district court granted defendants' motion for judgment on the pleadings and dismissed the RICO claims with prejudice, then declined supplemental jurisdiction over the state-law claims and dismissed them without prejudice. After the district court denied reconsideration without changing the result, Deck appealed.

Remand instructions

Remanded for further proceedings consistent with the opinion. The court did not direct a particular merits disposition of the remaining claims.

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