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Maplewood Bank and Trust Co. v. Acorn Inc.

Decided: October 11, 1985.

MAPLEWOOD BANK AND TRUST COMPANY, PLAINTIFF,
v.
ACORN, INC., ET AL, DEFENDANT



Rosemary Higgins Cass, J.s.c.

Cass

This summary judgment motion raises the issue, novel in this State, of whether state courts have concurrent jurisdiction with federal courts in the adjudication of private civil actions pursuant to § 1964(c) of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.A. § 1961-1968.*fn1 I hold that state courts lack such jurisdiction.

In May 1984 plaintiff Maplewood Bank and Trust Company (hereinafter Maplewood) brought suit against defendants, Acorn, Inc., Frank J. Coviello, Dorothy Spurgeon Coviello and William H. Spurgeon (hereinafter collectively Acorn) to collect on certain promissory notes which were overdue. Defendant filed an answer and counterclaim alleging claims for rescission, breach of contract, common law fraud and violation of fiduciary duty. In addition, it asserted a claim under § 1964(c) of RICO seeking treble damages and attorney's fees.

The gravamen of Acorn's RICO claim is that Maplewood fraudulently induced it to enter into and continue a contractual relationship based on a representation that the interest rate Maplewood was charging was based on its "prime rate," i.e., the lowest rate available to its commercial customers, when in fact it was not so based. As predicate acts, Acorn alleged regular use of the mails and wire on at least two occasions and within the last ten years to send false and fraudulent billing

statements and receive payments, "racketeering activities" as defined in 18 U.S.C.A. § 1961(1)(B).

Maplewood brought a motion for summary judgment as to the entire counterclaim. However, in its brief and at oral argument, it pursued only the issue of the RICO claim, the sixth count of the counterclaim. Thus, I make no determination on the other five counts. Moreover, the questions of whether Acorn alleged the requisite distinction between the RICO "person" and "enterprise" under § 1961(3) and (4), or alleged the requisite RICO injury under § 1962 or pleaded the alleged fraudulent predicate acts with sufficient particularity, become moot in light of my determination. 18 U.S.C.A. § 1961(3) & (4), § 1962.

Section 1964(c) of RICO provides:

Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee. [18 U.S.C.A. § 1964(c)]

It is black-letter law that the mere grant of jurisdiction to a federal court does not operate to oust a state court from concurrent jurisdiction. Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 479, 101 S. Ct. 2870, 2875, 69 L. Ed. 2d 784 (1981). Absent provision by Congress to the contrary or disabling incompatibility between the federal claim and state court adjudication, state courts may assume subject-matter jurisdiction over a federal cause of action. Id. at 477, 101 S. Ct. 2874.

In considering the propriety of state-court jurisdiction over any particular federal claim, the court begins with the presumption that state courts enjoy concurrent jurisdiction. (Citations omitted). Congress, however, may confine jurisdiction to the federal courts either explicitly or implicitly. Thus the presumption of concurrent jurisdiction can be rebutted by an explicit statutory directive, by unmistakable implication from legislative history, or by a clear incompatibility between state-court jurisdiction and federal interests. [ Id. at 478, 101 S. Ct. at 2875]

Since RICO has no provision explicitly confining jurisdiction to the federal courts, the question before me is whether Congress implicitly so restricted it. Defendants, relying on the case of Luebke v. Marine National Bank of Neenah, 567 F. ...


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