The passage of almost 20 years since the U.S. Supreme Court's first major decision on the civil aspects of the racketeering statute, Sedima, S.P.R.L v. Imrex Co.,[1] makes it clear that RICO has evolved into a major preoccupation for the Court. There are few, if any, other federal statutes that have figured so frequently as the subject of extensive and major opinions in the last two decades.
The latest decision, Scheidler v. National Organization for Women, Inc.,[2] reflects the second time that the complex, emotional and controversial litigation between abortion protesters and abortion providers has reached the high court.
The original 1994 decision in National Organization for Women, Inc. v. Scheidler,[3] generated substantial notoriety because it allowed the abortion providers' lawsuit against Operation Rescue and other protesters to proceed to trial and also appeared to settle what had been an important and unresolved issue — specifically, whether a defendant who lacked an economic motive for her conduct could be liable under RICO.
First Decision
The first Scheidler decision seemed to answer that question with the clear conclusion that the absence of economic motivation was not relevant, so long as a defendant's conduct had an impact on the business or property interests of the plaintiff. As a result, it was reasonably apparent, or so it seemed until the Scheidler decision in 2003, that someone who committed racketeering acts for no apparent economic reason — such as an abortion protester — could face RICO liability and damages if the victim's business or property interests were damaged, as would happen if an abortion clinic's operations were impaired by the protesters.
Although the new Scheidler decision did not explicitly overrule the original Scheidler opinion, it is inevitable that the more recent decision will serve as a basis for years to come to restrict RICO's application in civil cases alleging extortion as one of the predicate acts, as well as in criminal actions brought by the Justice Department for extortion or RICO violations based on extortion.
At issue in Scheidler was an easily summarized, and relatively notorious, set of facts. In 1986, the National Organization for Women, Inc. (NOW) and two health care centers that perform abortions sued a coalition of anti-abortion groups operating under the umbrella of the Pro-Life Action Network (PLAN) and a variety of other protesters and protest organizations, including Operation Rescue.
The plaintiffs' essential claim was that the anti-abortionists were associated with PLAN, the racketeering enterprise, and that they conducted the affairs of PLAN though a pattern of racketeering activity. This was a fairly elegant and straightforward theory that appeared to fit easily into the mold of the requirements of RICO §1962(c).
As it ultimately developed, however, the fatal and latent flaw of NOW's theory was that it cited violations of the Hobbs Act — the federal extortion statute — as a predicate offense. NOW claimed the anti-abortionists engaged in repeated acts of extortion to achieve their objective of a nationwide shutdown of abortion clinics.
Procedural History
Litigations are often like baseball games, with leads changing from inning to inning and fiercely contested games frequently going into extra innings. So it was with the Scheidler action.
In 1991, five years after the case was filed, the District Court dismissed it on the ground that the complaint failed to allege that the predicate acts of racketeering of the PLAN enterprise were economically motivated.[4] The trial court's decision was affirmed by the 7th U.S. Circuit Court of Appeals in 1992,[5] and it was that decision in turn that was reversed by the Supreme Court in the 1994 Scheidler opinion.
As the Court itself recently summarized, the 1994 opinion concluded "that RICO does not require proof that either the racketeering enterprise or the predicate acts of racketeering were motivated by an economic purpose."[6] (It is always useful, and sometimes revealing of the Court's own sleight-of-hand, to have a later Supreme Court decision explicitly summarize the holding of an earlier case.)
NOW and the other plaintiffs enjoyed a remarkable and highly publicized race to success after the remand. At the end of a seven week trial, the jury returned a verdict finding that Operation Rescue and its co-defendants had engaged in a pattern of racketeering activity that included 21 violations of the federal extortion statute, 25 violations of the applicable Illinois extortion statute, 25 instances of attempting or conspiring to commit either federal or state extortion, and numerous violations of the federal Travel Act, 18 U.S.C. §1952.
The jury awarded approximately $31,000 to NOW and $54,000 to an abortion clinic; these amounts were automatically trebled. Moreover, since only a judge can order injunctive and equitable relief, the District Court entered a permanent nationwide injunction prohibiting the protest groups from interfering in any abortion clinic activity. (Incidentally, even in the wake of the recent decision in Scheidler, it remains unsettled as to whether a District Court, in an action brought by a private party as distinct from the federal government, can enter injunctive or other forms of equitable relief.)
Relying on the 1994 Scheidler decision, the 7th Circuit affirmed. It rejected the protest groups' key argument that they had not obtained "property" within the meaning of RICO. As the 7th Circuit put it, "As a legal matter, an extortionist can violate the Hobbs Act without either seeking or receiving money or anything else. A loss to, or interference with the rights of, the victim is all that is required."[7]
It was, of course, precisely this ruling by the 7th Circuit that the Supreme Court rejected in the new Scheidler opinion. In a remarkable restriction or long-held views regarding the scope of the Hobbs Act — which defines extortion as "the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under cover of official right" (18 U.S.C. §1951(b)(2)) — the Court declared that NOW and the clinics could not satisfy the "obtaining of property" requirement under the theory that the protesters sought "to get control of the use and disposition of [the clinics'] property."[8]
New Meaning of Extortion
What was the flaw in NOW's theory and in the 7th Circuit's application of traditional standards on the scope of the Hobbs Act?
The Court in Scheidler reached back deeply into the English common law meaning of extortion, citing Blackstone's 1765 Commentaries on the Laws of England for the proposition that extortion was originally a property offense committed by a public official who took "any money or thing of value" to which he was not entitled on the pretense that he had a right to collect the property by virtue of his office.[9] The Hobbs Act, enacted in 1946, "expanded the common-law definition of extortion to include acts of private individuals."[10]
Other antique sources to which the Supreme Court resorted in Scheidler included the Field Code, a 19th-century model penal code. The Field Code's 1865 definition of extortion was "the obtaining of property from another without his consent, induced by a wrongful use of force or fear."[11]
Relying on these centuries-old concepts, the Scheidler opinion determined, in language that will frequently be cited in future legal briefs of defendants that:
There is no dispute in these cases that petitioners [Operation Rescue and the other defendants] interfered with, disrupted, and in some instances completely deprived respondents [the abortion clinics] of their ability to exercise their property rights. . . . But even when their acts of interference and disruption achieved their ultimate goal of "shutting down" a clinic that performed abortions, such acts did not constitute extortion because petitioners did not "obtain" respondents' property. Petitioners may have deprived . . . respondents of their alleged property right of their exclusive control of their business assets, but they did not acquire any such property. Petitioners neither pursued nor received "something of value from" respondents that they could exercise, transfer or sell. . . . To conclude that such actions constituted extortion would effectively discard the statutory requirement that property must be obtained from another, replacing it instead with the notion that merely interfering with or depriving someone of property is sufficient to constitute extortion.[12]
The implications of the new decision are an unexpected boon for defendants in civil racketeering cases that include extortion as an alleged predicate.
Until Scheidler, organized efforts by garbage collection companies, for example, to stifle a competitor by plunging knives into the competitor's truck tires, thus forcing the competitor to curtail or stop business, would without a doubt have been treated as extortion. In the wake of the new Scheidler opinion, there would be no extortion so long as the other companies did not directly take the trucks or customer accounts of the victimized competitor.
For criminal defendants facing extortion or racketeering charges, the new Scheidler decision may be manna from heaven. Blatant acts of intimidation and harassment that clearly would have been treated as extortion may now be "innocent" for purposes of the Hobbs Act if the defendant did not obtain property from the victim.
Again, a competitor's threat to a victim to stop a business activity would not be criminal if the defendant acquired nothing of tangible value, other than the pleasure of watching the victimized competitor alter its business practices or even fold up its tents because of fear.
Paul A. Batista is a trial lawyer in Manhattan and author of "Civil RICO - Second Edition" (Aspen, 2003).
FootNotes:
[1] 473 U.S. 479, 105 S.Ct. 3275, 87 L. Ed. 2d 346 (1985).
[2] __U.S. __, 123 S.Ct. 1057, __L. Ed 2d__ (2003).
[3] 510 U.S. 249, 114 S.Ct. 798, 127 L. Ed. 2d 99 (1994).
[4] National Organization for Women, Inc. v. Scheidler, 765 F. Supp. 937 (N.D. Ill. 1991).
[5] National Organization for Women, Inc. v. Scheidler, 968 F.2d 612 (1992).
[6] Scheidler, 123 S. Ct. at 1062.
[7] 267 F.3d at 709, quoting United States v. Stillo, 57 F. 3d 553, 559 (7th Cir. 1995).
[8] Scheidler, 123 S. Ct. at 1063.
[9] Scheidler, 123 S.Ct. at 1064, citing 4 William Blackstone, Commentaries on the Laws of England 141 (1765).
[10] Evans v. United States, 504 U.S. 255, 261, 112 S.Ct. 1881, 119 L. Ed. 2d 57 (1992).
[11] 4 Report of the Commissioners of the Code, Proposed Penal Code of the State of New York §613 (1865).
[12] Scheidler, 123 S.Ct. at 1066.
Date Received: July 09, 2003