The opinion of the court was delivered by: CALDWELL
I. Factual and Procedural Background
On June 10, 1982, the plaintiff, Deominia D'Iorio, filed a complaint in six counts by which she seeks to recover damages suffered as a result of allegedly fraudulent transactions involving the various defendants. In count one of the complaint, the plaintiff invokes the jurisdiction of this court pursuant to the provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO, 18 U.S.C. §§ 1961, et seq.), 18 U.S.C. § 1964(a) and (c), as well as 28 U.S.C. § 1331. Treble damages are sought. Counts two through six are pendent state claims which allege causes of action for wrongful appropriation of business opportunities, breach of fiduciary duties, civil conspiracy, fraudulent concealment, and breach of contract.
Various individuals and business entities are named in the complaint. They can be described briefly as follows: The defendant, Adonizio Brothers, is a Pennsylvania corporation engaged in the operation of a quarry. The plaintiff, her sister Yolanda Saporito, and the individual defendants Angelo Adonizio, Charles Adonizio, James Adonizio, Patrick Adonizio, Jr., Peter V. Adonizio and Samuel P. Adonizio constituted all the shareholders of Adonizio Brothers, Inc.
Defendant Addy Asphalt Company is a Pennsylvania corporation engaged in general construction work. The plaintiff and the individual defendants are the sole shareholders of the Addy Asphalt Company. The defendant Addy Construction Company is a general partnership consisting of the plaintiff and the individual defendants. The business of the Addy Construction Co. is to lease equipment to Adonizio Brothers, Inc. and the Addy Asphalt Company. The defendant Wilkes Equipment Company is a partnership consisting of the individual defendants. The business of Wilkes Equipment Company is, allegedly, to lease equipment to Adonizio Brothers, Inc. and the Addy Asphalt Company.
In the first count of her complaint, the plaintiff alleges three separate claims which she contends are within the ambit of RICO. First, she alleges that the individual defendants defrauded her by forming the Wilkes Equipment Company, without her knowledge, to appropriate business opportunities available to the business entities of which she was a partner or shareholder. She alleges that from January of 1971 through March of 1979 Wilkes purchased various pieces of equipment. This equipment was then rented to Adonizo Brothers, Inc. and Addy Asphalt at rates which, over the rental period, substantially exceeded the purchase price. To bring this claim within the purview of RICO, the plaintiff has alleged that the scheme involved use of the mails, including mailing of partnership withdrawals, disbursements, financial statements, invoices, etc.
The plaintiff has alleged, as part of the first count, a second scheme involving the purchase of Addy Asphalt common stock. According to the complaint, shares of Addy common stock made available by the death of Adam Petrillo, a shareholder, were never made available to the plaintiff or to Addy Asphalt Company for purchase. Instead, the complaint alleges, the individual defendants purchased this stock themselves. Again, various uses of the mails and wires are alleged, including the reciprocal mailing of payment in return for the shares of stock purchased.
Finally, in connection with the first count of the complaint, the plaintiff alleges that the individual defendants defrauded her by paying themselves excessive salaries from Adonizio Brothers, Inc. and Addy Asphalt Company. Use of the mails in forwarding salary payments is alleged.
The pendent state claims have the same factual core as the federal claims.
A motion to dismiss the complaint was filed by the defendants on July 1, 1982, and, after having been granted an extension of time for the filing of a supporting brief, a brief was filed by the defendants on July 30, 1982. The plaintiff filed an opposing brief with appendices on August 17, 1982, and a reply brief was filed on August 31, 1982. By order of September 14, 1982, we allowed the defendants until September 30, 1982, to file supplemental briefs in support of their motion to dismiss.
A supplemental brief was filed by the defendants on September 30, 1982, and a response was filed by the plaintiff on October 7, 1982. Defendants filed a reply brief on October 22, 1982. Various letters from counsel have also been filed of record.
Because our jurisdiction in this case hinges on the cognizability of the plaintiff's RICO claims, we must first address the defendants' various challenges to the validity of these claims. Plaintiff has invoked federal jurisdiction pursuant to 18 U.S.C. § 1964(a) and (c):
(a) The district courts of the United States shall have jurisdiction to prevent and restrain violations of section 1962 of this chapter by issuing appropriate orders, including, but not limited to: ordering any person to divest himself of any interest, direct or indirect, in any enterprise; imposing reasonable restrictions on the future activities or investments of any person, including, but not limited to, prohibiting any person from engaging in the same type of endeavor as the enterprise engaged in, the activities of which affect interstate or foreign commerce; or ordering dissolution or reorganization of any enterprise, making due provision for the rights of innocent persons . . . .
(c) 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.
Section 1962 of Title 18, United States Code, provides, in pertinent part:
(a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in or the activities of which affect, interstate or foreign commerce. A purchase of securities on the open market for purposes of investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, shall not be unlawful under the subsection if the securities of the issuer held by the purchaser, the members of his immediate family, and his or their accomplices in any pattern or racketeering activity of the collection of an unlawful debt after such purchase do not amount in the aggregate to one percent of the outstanding securities of any one class, and do not confer, either in law or in fact, the power to elect one or more directors of the issuer.
(b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.
(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.
Thus, there are several discrete prerequisites for an individual to maintain a RICO claim: the affiliation of a defendant with an enterprise engaged in or affecting interstate commerce, and the involvement in or conduct of the enterprise through a pattern of racketeering activity. See United States v. Vignola, 464 F. Supp. 1091 (E.D. Pa.), aff'd, 605 F.2d 1199 (3d Cir. 1979), cert. denied 444 U.S. 1072, 100 S. Ct. 1015, 62 L. Ed. 2d 753 (1980).
A. "Pattern of Racketeering Activity"