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Mayo, Lynch & Associates, Inc. v. Pollack

June 03, 2002


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-1371-90.

Before Judges Baime, Newman and Axelrad.

The opinion of the court was delivered by: Newman, J.A.D.


Argued: May 15, 2002

Plaintiff, Mayo, Lynch and Associates, was an engineering firm retained by defendant Secaucus Municipal Utilities Authority (SMUA) to design and supervise expansion of a sewerage treatment plant. Defendant David Pollack was the SMUA's attorney. The construction contract was awarded to defendant James P. Horan, Inc. (Horan), whose principals were defendants Patricia and Dorothy Horan (the Horans). Defendants Warren H. Berkle, Jr. and Thomas P. Carrigan were principals of the companies that bonded Horan for the project. Buck, Seifert & Jost was the engineering firm that replaced plaintiff on the job. The other defendants were SMUA or municipal officials.

Three of the SMUA officials and the Horans were convicted of engaging in a bribery and bid-rigging scheme. Plaintiff contends that Pollack, who approved faulty bonds submitted by Horan, was involved in the scheme and thus liable under the New Jersey and the United States Racketeer Influenced and Corrupt Organizations Acts (NJRICO and USRICO), N.J.S.A. 2C:41-1 to -6.2, and 18 U.S.C.A. §§ 1961 to -1968.

In granting summary judgment to Pollack, the trial judge determined that there was insufficient evidence to support a finding that Pollack was aware of or knowingly engaged in the bid-rigging enterprise. Plaintiff appeals, arguing that the judge erred in dismissing its claims that Pollack engaged in racketeering activity and conspiracy under both NJ and USRICO. We now reverse and reinstate the NJRICO and state and federal conspiracy claims and affirm the dismissal of the USRICO claim.


Plaintiff filed a third amended complaint containing twenty-two counts in March 1994. Only the RICO claims against Pollack are in issue on this appeal (counts seventeen, eighteen and nineteen); all the other claims were resolved.

In counts seventeen and eighteen of the third amended complaint, plaintiff alleged that the SMUA hired it in 1986 as engineer, to design and oversee the expansion of the Koelle Boulevard Waste-Water Treatment Plant. In response to the SMUA's advertisement, three companies submitted bids for the construction work. Plaintiff alleged that the Horans bribed defendants Joseph Pini, Sr., the chair of the SMUA, and Virginia Maione, its executive director, and others, "to use their official positions to arrange for the unlawful award of the construction contract" to Horan. Horan submitted a blank bid, which was opened last, and Maione wrote in $14,999,000, an amount lower than that of the other bidders.

The complaint further asserted that Maione and Pini, Sr. pled guilty in the United States District Court for the District of New Jersey "to accepting this bribe and bid- rigging," in violation of 18 U.S.C.A. §§ 1951 and 1952. Joseph Pini, Jr., the SMUA's chief inspector, admitted, in a plea agreement, to taking a $5000 bribe in connection with the project.

According to the complaint, the bid specifications required the bid to contain a bid bond and consent of surety from a surety licensed in New Jersey and listed on a U.S. Treasury Circular 570. However, Horan did not submit a consent of surety with its bid, and its bid bond, issued by National Sureco, was "blank as to price." Berkle, National Sureco's principal, later pled guilty in the United States District Court for the District of New Jersey to issuing false and fraudulent surety bonds, including this one.

At Pollack's request, after the bids were opened, Horan submitted a consent of surety from UASCO (United American Surety Company), which was neither licensed in New Jersey nor listed on the Treasury Circular.

Pollack examined the bids and, despite these deficiencies, determined that Horan's bid documents accorded with the specifications. The contract was awarded to Horan.

According to the complaint, UASCO issued performance and payment bonds for Horan, but it limited its liability to "the value of collateral posted by the contractor, which was valueless at the time of the contractor's default." Fidelity & Deposit Company of Maryland also issued payment and performance bonds for Horan, which were forged.

In count nineteen of the third amended complaint, plaintiff accused Pollack of conspiring with Pini, Sr., Maione and others "to conduct and participate in the affairs of the SMUA through a pattern of racketeering activities."

Plaintiff alleged that these defendants' violations of NJ and USRICO harmed plaintiff because it was forced to work with an incompetent contractor; "construction was delayed, the project exceeded budget, and the workmanship ... was shoddy and unprofessional."

On summary judgment, the following facts were developed in more detail. In a consent of surety, issued on May 27, 1987, the Aetna Casualty & Surety Company agreed to issue a performance and payment bond, "if the Contract for which the preceding Proposal is made be awarded to the corporation ... making the same." The bond listed Neri-Jarvis as the principal, but Neri-Jarvis was a Horan subcontractor.

In a bid bond, dated May 29, 1987, UASCO bound itself, on behalf of Horan, to the SMUA "in the sum of 10% of Bid Dollars" for improvements to the Koelle Boulevard Wastewater Treatment Plant, if the SMUA accepted Horan's bid. The amount of the bid was left blank.

In a letter of June 2, 1987, UASCO wrote to the SMUA announcing that it intended to become the surety on the performance and labor and material bonds, on behalf of Horan, for the Koelle Boulevard Wastewater Treatment Plant project. UASCO disclaimed any liability if it did not issue the required bonds.

In a letter to the SMUA of June 2, 1987, Pollack asserted that he had reviewed "all the bid documents required to be submitted in accordance with "Specifications -- Improvements to the Koelle Boulevard Waste Water Treatment Plant ... and it is my opinion that James P. Horan, Inc. has fully complied with same." Pollack stated that in his "legal opinion" the contract should be awarded to Horan, the lowest bidder.

Pollack certified that, during the bidding process and when he rendered his opinion, he did not know about the bid- rigging scheme, the blank Horan bid, and the bribes. He said that, when he rendered his opinion, he did not "have any knowledge that the bid documents submitted by James P. Horan were not in accordance with contract specifications. [He also] did not know that the consent of surety in the Horan bid was omitted and the bid bond was blank as to price in violation of the contract specifications."

Pollack further certified that he did not know that "the bid bond and the consent of surety were provided by UASCO, a company that was neither licensed to do business in New Jersey, nor on the U.S. Treasury Circular 570." Pollack admitted that these two criteria were "part of the bid specifications," but that he made no effort to determine whether UASCO met either of these requirements before he "wrote the letter," apparently referring to his June 2, 1987, letter certifying that the bonds complied with the specifications.

Maione, Patricia Horan and Pini, Sr. asserted that they were the only ones, together with Dorothy Horan, who knew that Horan's bid was blank and Maione filled it in; they also said that the Horans gave money only to Maione, the two Pinis and Frank Devon, the Secaucus municipal clerk.

Although no documentation appears in the record, plaintiff describes the federal court guilty plea of Maione to criminal conspiracy and her testimony that she demanded and received over $50,000 from Horan to influence the SMUA to award the contract to Horan. According to plaintiff, Maione admitted falsifying public bid documents to insure that Horan appeared to be the lowest bidder. Plaintiff asserts that the Pinis also pled guilty in federal court to "a conspiracy to accept bribes and extort kickbacks and violate the public bidding laws." Pini, Sr. testified that he and Maione demanded over $100,000 from Horan.

The judge found that Maione, the Pinis, Devon and the Horans were "prosecuted and convicted." Pollack admits that the bid-rigging conspiracy existed and that the participants pled guilty, noting that he was not indicted.

UASCO issued a performance bond on August 13, 1987, for $14,999,000 in favor of the SMUA, on behalf of Horan, the principal. However, UASCO limited its liability, "all other limits and conditions notwithstanding," to "the value of collateral assigned to it by the Principal." The bond further recited that Horan had issued a promissory note for $14,999,000 "as security for faithful performance of this contract."

UASCO also issued a labor and material payment bond on August 13, 1987, for $14,999,000 in favor of the SMUA on behalf of Horan, ...

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