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Marshall-Silver Construction Co. v. Mendel

filed: December 9, 1987.


On Appeal From the United States District Court For the Eastern District of Pennsylvania, D.C. Civil Action No. 86-7103. On Remand From The Supreme Court of the United States.

Author: Stapleton

BEFORE: STAPLETON and WEIS, Circuit Judges, and DIAMOND, District Judge*fn*


STAPLETON, Circuit Judge:

In Marshall-Silver Constr. Co. v. Mendel, 835 F.2d 63 (3d Cir. 1987), this court affirmed the dismissal of a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. ยงยง 1961-68 (1982 ed. and Supp. V), based on the defendants' allegedly extortionate attempt to drive the plaintiff out of business. We concluded that the plaintiff's allegations of racketeering activity, even if taken as true, were insufficient to support the requisite finding that a "RICO pattern" existed and we therefore affirmed the district court's dismissal of the complaint under Federal Rule of Civil Procedure 12(b)(6). The Supreme Court granted Marshall-Silver's petition for a writ of certiorari, vacated our judgment, and remanded the case for further consideration in light of the Court's recent decision in H.J. Inc. v. Northwestern Bell Telephone Co., 109 S. Ct. 2893 (1989). Upon reconsideration, we will affirm the district court's dismissal of the complaint for failing to allege a sufficient RICO pattern.


A more detailed account of the facts of this case is set out in our initial opinion, 835 F.2d at 63; the facts essential to this decision, however, are summarized here. Plaintiff Marshall-Silver, a general contractor, and the defendants became embroiled in a dispute when Marshall-Silver withheld payment from one of its subcontractors, Barton Engineering Co. ("Barton"), for failing to complete its work in a timely and acceptable manner. The defendants Mendel and Murray were shareholders and officers of Barton. Their law firm, which is also a defendant, represented Barton. In a meeting on June 29, 1984, and in letters dated July 2 and 3, 1984, the defendants allegedly threatened to drive Marshall-Silver out of business if Barton was not paid for its work. Marshall-Silver refused to comply and in late December 1984 Barton petitioned the bankruptcy court to have Marshall-Silver declared bankrupt. In February 1985, the bankruptcy court dismissed the petition after Barton and other creditors of Marshall-Silver failed to post the necessary bonds.

In its complaint, Marshall-Silver alleged that the defendants filed the bankruptcy petition with knowledge that it was false, included two other creditors in the petition when they knew they were not authorized to do so, and maliciously publicized the filing of the petition to the media falsely asserting that Marshall-Silver was insolvent. The predicate acts upon which the plaintiff based its RICO claim were the allegedly extortionate threat made at the June 29th meeting, the two follow-up letters of July 2nd and 3rd, the filing of the fraudulent involuntary bankruptcy petition in December of that same year, and the generation of false publicity in connection with that filing. As a result of the filing of the fraudulent bankruptcy petition and attendant publicity, Marshall-Silver claimed that it could not obtain needed construction bonds and was driven out of business. The complaint sought compensatory and punitive damages based on the business losses suffered in this manner.

In our first opinion in this case, we held that plaintiff's allegations did not satisfy what the Supreme Court had identified in Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n.14 (1985), as the "continuity" component of the pattern requirement. We reasoned that "the target of RICO . . . is criminal activity that, because of its organization, duration, and objectives poses, or during its existence posed, a threat of a series of injuries over a significant period of time." Marshall-Silver, 835 F.2d at 66-67. Cases like the plaintiff's, which involved "a single victim, a single injury, and a single short-lived scheme with only two active perpetrators," did not pose such a threat and thus did not satisfy the pattern requirement. Id. at 67.

We now reconsider Marshall-Silver's allegations in light of the Supreme Court's decision in H.J. Inc. v. Northwestern Bell Telephone Co., 109 S. Ct. 2893 (1989). Since the district court dismissed plaintiff's suit under Rule 12(b)(6), Fed. R. Civ. P., our review is plenary. We must accept as true all well-pleaded allegations of the complaint, and construe them in the light most favorable to the plaintiff; the dismissal may stand only if the plaintiff alleges no set of facts which, if proved, would entitle him or her to relief. Labov v. Lalley, 809 F.2d 220, 221-22. (3d Cir. 1987)


In Barticheck v. Fidelity Union Bank, 832 F.2d 36 (3d Cir. 1987), this court "read the [RICO] legislative history's reference to "continuity" as simply calling for an inquiry into the extent of the racketeering activity . . . [but] decline[d] to adopt a verbal formula for determining when unlawful activity is sufficiently extensive to be continuous." 832 F.2d at 40. We noted our understanding

that the existence of a RICO pattern does not turn on the abstract characterization of racketeering acts as "continuous" and "related" but rather on a combination of specific factors such as the number of unlawful acts, the length of time over which the acts were committed, the similarity of the acts, the number of victims, the number of perpetrators, and the character of the unlawful activity.*fn1

Id. at 38-39. Barticheck also rejected the defendant's attempt to cabin the definition of pattern by requiring that a plaintiff prove the defendant's involvement in more than one illicit "scheme." We reasoned that nothing in RICO or its legislative history suggested that Congress had intended to so limit the statute; instead ...

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