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UNITED STATES v. LOCAL 560

November 1, 1982

UNITED STATES of America, Plaintiff,
v.
LOCAL 560, etc. et al., Defendants



The opinion of the court was delivered by: ACKERMAN

 This civil action brought pursuant to the Racketeer Influence and Corrupt Organizations Act (RICO) *fn1" presents a question of first impression. The United States charges that Local 560 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, (Local 560), together with its Welfare and Pension Funds (Funds) and its Severance Pay Plan, (Plan), is a "captive labor organization." *fn2" It principally seeks an order placing Local 560 under a trusteeship, divesting the individual defendants of their interests in the union, and prohibiting their future involvement in the union's affairs. Local 560, the Funds and the Plan are named in the complaint as nominal defendants and referred to collectively as the "Local 560 Enterprise." Also named as defendants are the current members of the Executive Board of Local 560: Salvatore Provenzano, Joseph Sheridan, Josephine Provenzano Septembre, J. W. Dildine, Thomas Reynolds, Sr., Michael Sciarra and Stanley Jaronko; the trustees and administrators of the Plan: Salvatore Provenzano and Josephine Provenzano Septembre; the employee trustees of the Funds: Salvatore Provenzano and Thomas Reynolds, Sr.; and the following individuals: Anthony Provenzano, Nunzio Provenzano, Stephen Andretta, Thomas Andretta and Gabriel Briguglio. The government with this court's consent has entered into stipulations of settlement with Anthony Provenzano *fn3" and Nunzio Provenzano. *fn4"

 The complaint alleges that the Local 560 Enterprise is an "enterprise" within the meaning of 18 U.S.C. § 1961(4). *fn5" It further charges that the named individuals are associated under the leadership of defendant Anthony Provenzano, (Provenzano Group), which group allegedly unlawfully conspired, in violation of 18 U.S.C. § 1962(d), to violate and actually did violate 18 U.S.C. § 1962(b) and (c).

 The case is presently before me *fn6" on the motion of Local 560 pursuant to Fed.R.Civ.P. 12(b) (6) to dismiss paragraph 12(a) of the complaint for failure to set forth a cause of action. A complaint may only be dismissed pursuant to Fed.R.Civ.P. 12(b) (6) if, accepting the factual allegations of the complaint as true, it appears beyond a doubt that the plaintiff can prove no set of facts which would entitle him to relief. Jamieson v. Robinson, 641 F.2d 138 (3d Cir. 1981). For the reasons which follow, I am denying the defendant's motion to dismiss.

 In order to understand the thrust of the defendant's motion, it is necessary to outline the structure of this complaint in some detail prior to summarizing the arguments raised in the moving papers.

 The government alleges in paragraph 12(a) that defendant Anthony Provenzano and other defendants either associated with the Provenzano Group or aiding and abetting the same, violated section 1962(b) of RICO. *fn7" Section 1962(b) provides in pertinent part:

 
It shall be unlawful for any person through a pattern of racketeering activity . . . to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect interstate or foreign commerce.

 "Pattern of racketeering activity" is defined as at least two acts of racketeering activity, within a period of ten years (excluding any period of imprisonment), one of which has to have occurred after the effective date of the Act. 18 U.S.C. § 1961 (5). RICO defines "racketeering activity" by reference to certain crimes chargeable under state law and to certain indictable offenses under federal law. 18 U.S.C. § 1961(1). *fn8"

 Paragraph 12(a) charges the "predicate" *fn9" offenses of murder and Hobbs Act extortion, 18 U.S.C. § 1951, as the pattern through which the defendants unlawfully acquired and maintained a controlling interest in the Local 560 Enterprise. Specifically, the property which is alleged to have been systematically extorted was "in the form of [the members'] union rights as guaranteed by the provisions of sections 157 *fn10" and 411 of Title 29."

 The union rights guaranteed by section 411 were enacted as Title I of the Labor Management Reporting and Disclosure Act of 1959 (LMRDA), 29 U.S.C. §§ 411 et seq., and referred to as the "Bill of Rights of Members of Labor Organizations." *fn11" Its emphasis is

 
on the rights of union members to freedom of expression without fear of sanctions by the union, which in many instances could mean loss of union membership and in turn loss of livelihood.

 Finnegan v. Leu, 456 U.S. 431, 102 S. Ct. 1867, 1870, 72 L. Ed. 2d 239 (1982). The provision which ultimately was enacted as Title I was introduced as a floor amendment by Senator McClellan to the Kennedy-Ervin bill, S.1555. 105 Cong.Rec. 5810 (daily ed., Apr. 22, 1959) II NLRB, Legislative History of the Labor-Management Reporting and Disclosure Act of 1959 (hereinafter Legis.Hist.) 1102. Senator McClellan believed that

 
. . . we ought to start with the union man, with the worker, and to relieve him from the oppression which has been thrust upon him in some places. We should restore to him his rights. We should vest in him again the power to do something to protect his rights. We must give him the authority again to run his own union. We must pass a law, such as the measure now proposed, which will enable him to prevent usurpation by would-be exploiters. Let us start to help the worker.

 105 Cong.Rec. 5813 (daily ed. Apr. 22, 1959), II Legis.Hist. 1105. The amendment passed by a slim margin of 47 to 46. 105 Cong.Rec. 5827 (daily ed. Apr. 22, 1959) II Legis.Hist. 1119. See generally United Steelworkers of America v. Sadlowski, 457 U.S. 102, 102 S. Ct. 2339, 2342, 72 L. Ed. 2d 707 (1982).

 The particular acts of the defendants which allegedly created the climate of intimidation which in turn induced the surrender of the members' rights are included as subparagraphs (1) through (28) of paragraph 12(a). The specific acts alleged, are: (1) the June 1961 murder of Anthony Castellitto; (2) the August 1961 appointment of Salvatore Provenzano to the position of Trustee formerly occupied by Castellitto; (3) the September 1961 appointment of Salvatore Briguglio -- the alleged murderer of Castellitto -- to the position of Business Agent; (4) the February 1963 appointment of Nunzio Provenzano to the position of Business Agent following his January 1963 conviction for extortion; (5) the May 1963 murder of Walter Glockner; (6) the 1964 appointment of Robert A. Luizzi to the position of Business Agent in spite of a record of criminal convictions; (7) the May 1967 appointment of Luizzi to the position of Trustee; (8) the February 1969 appointment of Salvatore Briguglio to position of Business Agent following completion of a term of imprisonment for extortion; (9) the April 1969 appointment of Nunzio Provenzano to the position of clerk following completion of a term of imprisonment for extortion; (10) the 1970 appointment of Nunzio Provenzano to the position of Business Agent; (11) the 1971 appointment of Thomas Reynolds, Sr. to the position of Business Agent in spite of a record of criminal activity; (12) the 1972 appointment of Nunzio Provenzano to the position of Fund Trustee; (13) the 1972 appointment of Salvatore Briguglio to the position of Fund Trustee; (14) the allowance of frequent visitations by Armand Faugno and Thomas Andretta to the offices of Local 560; (15) the January 1963 appointment of Nunzio Provenzano to the position of Secretary-Treasurer; (16) the 1973 appointment of Reynolds to the position of Fund Trustee; (17) the 1974 resumption of duties as Business Agent by Salvatore Briguglio following completion of a term of imprisonment for counterfeiting; (18) the 1974 appointment of Luizzi to the position of Fund Trustee; (19) the November 1975 appointments of Anthony and Nunzio Provenzano to the positions of Secretary-Treasurer and President, respectively, in spite of a record of convictions for extortion; (20) the February 1977 appointment of Reynolds to the position of Trustee; (21) the July 1978 appointment of Josephine Provenzano Septembre to the position of Secretary-Treasurer following Anthony Provenzano's conviction for the Castellitto murder; (22) the July 1981 appointment of Salvatore Provenzano to the position of President following Nunzio Provenzano's forced resignation as a condition of bail on a labor racketeering conviction; (23) the Executive Board's failure to recover monies wrongfully converted by Anthony Provenzano; (24) the retention of Marvin Zalk as Fund Administrator in spite of payments accepted by him from an insurance company representative during the 1950's; (25) the retention of Ralph Torraco as the Fund's independent certified public accountant in spite of his federal indictment for systematically overbilling the Fund; (26) the extortion of contributions to the defense funds of the Provenzanos and Michael Sciarra from union members; (27) the 1981 appointment of Luizzi to the position of Business Agent; and (28) associations by some of the defendants with Frank "Funzi" Tieri and Matteo Alfredo Ianniello, reputed organized crime members.

 Defendant Local 560 in moving to dismiss paragraph 12(a) contends that the rights guaranteed by section 411 are not "property" extortable under the Hobbs Act. The argument is premised on two propositions, the correctness of either of which will entitle the defendant to the dismissal of this portion of the complaint: first, that the concept of "property" under the Hobbs Act does not embrace the rights created under section 101 of the LMRDA; and second, to the extent that these rights are extortable, that the LMRDA provides the exclusive criminal sanction for such a violation. See 29 U.S.C. § 530. *fn12"

 The government argues that section 610 of the LMRDA is not the exclusive remedy for extortionate taking of section 411 rights. The LMRDA, it contends, neither expressly nor impliedly repealed the Hobbs Act's application to conduct which might also violate sections of the LMRDA because Congress did not intend the LMRDA to be exclusive. The government further submits that section 530 does not prohibit the conduct alleged in the complaint because it is essentially an assault and battery statute.

 A review of some of the history preceding the enactment of the Hobbs Act and the LMRDA will be helpful for an understanding of the issues raised in this motion. The precursor to the Hobbs Act was the Anti-Racketeering Act of 1934. It was designed to penalize extortion and racketeering and to protect commerce against interference by threats and violence. Annot., 4 A.L.R.Fed. 881, 890 (1970). In 1942, the Supreme Court narrowly construed the provisions of the Anti-Racketeering Act to exclude from its extortion coverage certain labor activities. Congress thereafter enacted the Hobbs Act in reaction to that decision in order to implement its intentions to curb labor racketeering. While aimed at labor racketeering, its broad terms cover a field comparable to existing state extortion statutes. See generally United States v. Harding, 563 F.2d 299, 302-04 (6th Cir.1977) cert. denied, 434 U.S. 1062, 98 S. Ct. 1235, 55 L. Ed. 2d 762 (1978).

 The LMRDA, in addition to the Bill of Rights of Title I discussed earlier, contained five titles designed primarily to achieve internal union democracy with one additional title covering amendments to the Taft-Hartley Act. It included comprehensive reporting requirements, 29 U.S.C. §§ 431-41; regulation of the imposition of trusteeships over subordinate labor organizations, 29 U.S.C. §§ 461-66; the establishment of election procedures, 29 U.S.C. §§ 481-83; safeguards in the form of fiduciary standards and responsibilities for officers, 29 U.S.C. §§ 501-04; and numerous civil, administrative, and criminal enforcement provisions. The congressional debate centered primarily upon the Taft-Hartley Amendments. For a discussion of the controversy surrounding its passage, see ABA, The Developing Labor Law, 49-59 (1971).

 In analyzing the interplay between the Hobbs Act and the LMRDA, I take guidance from the recent opinion of the Third Circuit Court of Appeals in United States v. Boffa, 688 F.2d 919 (1982). In Boffa, this Circuit found, on the one hand, that the RICO predicate act of mail fraud, 18 U.S.C. § 1341, may encompass a scheme to deprive union members of the right to the honest and faithful services of union officials provided in section 501 of the LMRDA, 29 U.S.C. § 501, but may not, on the other hand, encompass a scheme to deprive employees of rights created by section 7 of the National Labor Relations Act (NLRA) 29 U.S.C. § 157. The dichotomy of treatment given these statutes is instructive.

 In Boffa the defendants Eugene Boffa, Sr., Robert Boffa, Sr., and Chandler Lemon who operated labor leasing businesses switched labor leasing contracts they had with certain facilities from corporations they controlled to others ostensibly independent but which they also controlled for the purpose of lowering wages paid and/or increasing fees charged. The defendants assured themselves of the cooperation of defendant Francis Sheeran who was the president of the local Teamsters union which represented some of the leased drivers by delivering money or some other thing of value to him in violation of the Taft-Hartley Act, 29 U.S.C. § 186(a) (4). The mailing of the notices of termination to the employee drivers in furtherance of the scheme formed the basis of the mail fraud indictments. At 924-925.

 In examining the contentions of the appellants that the labor switches were, at most, unfair labor practices, the Third Circuit first reviewed the statutory coverage of the mail fraud statute to find that in general "a scheme to deprive persons of intangible rights or interests may be within the ambit of 18 U.S.C. § 1341." Id. at 927. However, in order to discern whether any federal statute in particular can serve as the source of an intangible right in a mail fraud ...


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