Edmondson & Gallagher, Thomas Gallagher and James Edmondson v. Alban Towers Tenants Association Vera Ruser Richard A. Gross Charles J. Beard Richard W. Benka Stanley B. Bernstein Robert L. Birnbaum Deborah B. Breznay James K. Brown John L. Burke, Jr. Philip Burling Laurie Burt Stefanie D. Cantor William J. Cheesman Mark F. Clark Peter W. Coogan Stephen B. Deutsch David B. Ellis Peter B. Ellis H. Kenneth Fish Kevin J. Fitzgerald Edward N. Gadsby, Jr. Louis P. Georgantas David R. Geiger Kenneth L. Grinnell Dean F. Hanley Thomas M.S. Hemnes John H. Henn Christian M. Hoffman Wendy B. Jacobs Dennis R. Kanin Michael B. Keating Henry M. Kelleher Bruce A. Kinn William B. Koffel Sandra L. Lynch Paul v. Lyons Paul Randolph Murphy John D. Patterson, Jr. Steven W. Phillips David R. Rosenblum Robert S. Sanoff Leonard Schneidman Sandra Shapiro James A. Smith Adam Sonnenschein Sandra L. Spalletta John M. Stevens, Jr. Cathleen Douglas Stone Robert W. Sweet, Jr. Arthur G. Telegan Marc K. Temin Paul Robert W. Sweet, Jr. Donald
Docket: 94-7064
Court: Court of Appeals for the D.C. Circuit; March 9, 1995; Federal Appellate Court
Consolidated cases involve appellants Thomas Gallagher and James Edmondson who sought to acquire the Alban Towers apartment building from Georgetown University. After a failed purchase, they filed separate lawsuits in D.C. Superior Court against the Alban Towers Tenants Association and several individuals, including its president Vera Ruser and attorney Richard Gross, alleging tortious interference with contract, abuse of process, malicious prosecution, conspiracy to violate RICO, and violations of the RICO statutes (18 U.S.C. §§ 1961, 1962(c, d)). The appeals were heard by the United States Court of Appeals for the District of Columbia Circuit, with oral arguments presented on November 1, 1994, and a decision rendered on March 10, 1995. The appellants were represented by David J. Branson and Daniel J. Culhane, while the appellees were represented by Rodney F. Page and James B. Rosenthal. The case number references are 93-7146 and 94-7064, originating from the United States District Court for the District of Columbia (case 93cv01090). Circuit Judge Stephen F. Williams authored the court's opinion, with Chief Judge Edwards and Circuit Judge Ginsburg also participating.
Defendants removed the cases to federal district court and filed motions to dismiss or for summary judgment, which the court granted in two memorandum opinions, finding that the alleged predicate acts under RICO did not establish a "pattern of racketeering activity" and failed to meet RICO's continuity requirement. Consequently, the court dismissed the federal claims and exercised supplemental jurisdiction to dismiss the state claims on various grounds, including laches and the Noerr-Pennington doctrine. The court's dismissal of the RICO claims was affirmed, as the alleged scheme involved a single transaction causing discrete injury to a limited number of victims. However, the district court abused its discretion by addressing the local-law claims after dismissing the federal claims. The judgment was vacated, and the case was remanded with instructions to either return it to D.C. Superior Court or dismiss without prejudice, allowing the plaintiffs to refile their claims there.
The plaintiffs, Edmondson and Gallagher, along with Byrd as a broker, had agreed to purchase Alban Towers for $16 million, with an increasing price and a $650,000 earnest money deposit. Tenants of Alban Towers had a statutory right of first refusal to purchase the property under the D.C. law. The tenants formed the Alban Towers Tenants Association and sought financing to match the deposit and purchase price. On the last day to exercise their right, they submitted a purchase agreement without a deposit. The following day, the defendants presented a personal check for the deposit, which was allegedly untimely and insufficient due to insufficient funds in the account. Despite the tenants not meeting the conditions to exercise their rights, a notice of rights was filed after the deadline, creating a cloud on the title and necessitating Georgetown to file a lawsuit to clear title.
Tenants allegedly misused a quiet-title action to manipulate the sale of a building, attempting to extort $2,000,000 from Edmondson, Gallagher, or Georgetown through baseless defenses involving perjury, fraud, and bribery. They falsely claimed Georgetown obstructed the funding of a check by Van Wagner, concealed Van Wagner's whereabouts, and submitted false affidavits from Van Wagner and associates, asserting that the check was timely delivered and adequately funded. These affidavits were reportedly obtained through bribery and false promises of business. Throughout the litigation, the title to Alban Towers remained disputed, and by the time the D.C. Court of Appeals allowed the sale to proceed in December 1989, nearly three years after the tenants' purchase rights expired, market conditions had significantly deteriorated, rendering the contract unperformable.
Edmondson and Gallagher brought a civil suit under RICO, alleging violations of 18 U.S.C. § 1962(c) for conducting enterprise affairs through racketeering and § 1962(d) for conspiracy to violate RICO provisions. They asserted multiple predicate offenses, including bribery and fraud. However, the Supreme Court requires plaintiffs to demonstrate both a sufficient number of predicate acts and the continuity of criminal activity. Although the plaintiffs claimed the defendants' actions indicated a threat of future misconduct, the court noted that there was no substantive basis for expecting the defendants to engage in RICO violations again, highlighting that merely showing past acts does not suffice to establish open-ended continuity.
Plaintiffs' allegations revolve around a closed period of continuous criminal activity. The Supreme Court's decision in H.J. provides limited guidance on the characteristics essential for establishing a pattern under RICO, emphasizing a commonsense approach and indicating that further clarification would stem from future cases unless Congress intervenes. Various factors have been assessed by courts to determine if a pattern exists, including the number of unlawful acts, the duration of these acts, their similarity, and the number of victims and perpetrators involved. In the current case, plaintiffs claim a single scheme aimed at preventing or delaying the sale of Alban Towers, resulting in one discrete injury—the loss of the sale or ransom payment—affecting only three identified victims. The court finds that this combination of a single scheme, singular injury, and limited victims makes it unlikely for plaintiffs to establish a RICO claim.
The court references the Sil-Flo case, where multiple acts did not demonstrate a pattern due to their focus on a singular goal affecting one individual, a situation analogous to the current case despite the presence of three victims. The plaintiffs' comparison to Beauford v. Helmsley is dismissed as the latter involved extensive fraudulent activities affecting over 8,000 tenants over a prolonged period, indicating a broader threat of continuity. The district court's conclusion is supported, asserting that the alleged acts illustrate a single scheme with minimal impact and do not suggest a wider conspiracy, leading to the failure of the Sec. 1962(d) claim.
The district court properly dismissed the plaintiffs' RICO claim and retained jurisdiction over common law claims under D.C. law, as these claims were part of the same case or controversy. The court had the authority to decide on these claims but the decision to do so was at its discretion, guided by factors in 28 U.S.C. Sec. 1367(c). Upon review, it appears the court did not document its consideration of these factors before proceeding with the common law claims.
Two specific bases under Sec. 1367(c) support the court's potential decision to decline supplemental jurisdiction: first, all claims over which it had original jurisdiction were dismissed (Sec. 1367(c)(3)), and second, the local law claims raised novel or complex issues of D.C. law (Sec. 1367(c)(1)). There is a noted inconsistency between D.C. courts and federal courts regarding the elements required for the tort of tortious interference with contract, complicating the legal landscape. D.C. courts have established that a breach of contract is essential for tortious interference with contractual relations, while some federal courts disagree, suggesting that mere intentional interference suffices. This ambiguity necessitates careful consideration of state law to avoid unnecessary legal confusion and to ensure justice, with D.C. courts being in a better position to address these unsettled legal questions.
Comity and fairness strongly favor the District of Columbia courts to handle the claims at issue. Judicial economy and convenience offer minimal opposition, as the district court has engaged little with the unresolved issues, having not yet conducted a trial on the common law claims. The potential for substantial judicial resource expenditure exists if the court were to carefully analyze the grounds for the prior dismissal of these claims. There is little difference in convenience for the parties between litigating in D.C. or federal court.
The case is remanded to the district court with instructions to either remand it to the D.C. courts or dismiss it without prejudice, allowing Edmondson and Gallagher to refile there. The district court retains discretion in this matter, which remains unaffected by the enactment of 28 U.S.C. § 1367(d), which tolls state statute limitations for 30 days post-dismissal, alleviating some concerns about potential claim loss. However, issues like party convenience and case resolution speed persist. Legislative history indicates no intent by Congress to restrict the district court's remand discretion in cases removed from state court. The district court will decide between dismissal without prejudice or remanding under Carnegie-Mellon.
The district court appropriately dismissed the plaintiffs' RICO claim, determining that the alleged actions constituted a single scheme impacting a limited number of victims, rather than a pattern of racketeering. Consequently, with the RICO claim dismissed, the court was left with related common law claims under D.C. law.
The district court possessed the authority to adjudicate the common law claims due to a legitimate federal question and the claims forming part of the same case or controversy under 28 U.S.C. § 1367a. However, the decision to exercise that authority is at the district court's discretion, informed by the factors outlined in 28 U.S.C. § 1367c, which is rooted in the precedent set by United Mine Workers of America v. Gibbs. The review of this discretion is conducted for abuse, as established in Diven v. Amalgamated Transit Union International.
In this instance, the district court did not document its consideration of the relevant factors before transitioning from dismissing the RICO claims to addressing the common law claims. Section 1367(c) allows district courts to decline supplemental jurisdiction if certain conditions are met, including: (1) the claim raises novel or complex state law issues; (2) the claim predominates over those with original jurisdiction; (3) all claims with original jurisdiction have been dismissed; or (4) exceptional circumstances warrant declining jurisdiction.
The current case meets two of these criteria: it involves the dismissal of all original jurisdiction claims and presents novel or complex state law issues, as evidenced by conflicting interpretations of law between D.C. courts and federal courts regarding tortious interference with contract claims. Notably, D.C. courts require a breach of contract as an element of tortious interference, while some federal courts do not. This discrepancy highlights the potential for unnecessary state law determinations, which should be avoided to promote judicial economy, fairness, and comity, as articulated in Gibbs.
D.C. courts are deemed more suitable for resolving the unsettled legal questions in this case, supporting a preference for them to adjudicate the claims based on principles of comity and fairness. Judicial economy and convenience do not significantly oppose this; the district court has not substantially engaged with the issues at hand, as there has been no trial or detailed analysis of the common law claims. Although the district court's dismissal grounds are not evaluated, affirming its conclusions would require extensive new analysis, consuming considerable judicial resources. The parties would experience similar convenience whether litigating in D.C. or federal court. The case is remanded to the district court with instructions to either remand it to the District of Columbia courts or dismiss without prejudice, allowing the plaintiffs to refile there. The district court retains discretion in this decision, unaffected by the enactment of 28 U.S.C. § 1367(d), which tolls state statute of limitations for claims under federal supplemental jurisdiction until 30 days post-dismissal, alleviating concerns about claim loss upon dismissal. Legislative history indicates no intent to restrict the district court’s discretion in cases removed from state court. On remand, the district court will decide whether to dismiss without prejudice under §§ 1367(c) and (d) or to remand the case to D.C. courts.
