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FLAHERTY v. TORQUATO

November 26, 1985

TOM FLAHERTY, Controller of the City of Pittsburgh, Plaintiff,
v.
JOHN R. TORQUATO, JR., JUDY ELLIS, ALLEN R. STONEMAN, DAVID I. HERBERT, ROBERT RADE STONE and RONALD C. SCHMEISER, Defendants



The opinion of the court was delivered by: ZIEGLER

 ZIEGLER, District Judge

 The Controller of the City of Pittsburgh, Pennsylvania, filed a civil action for money damages predicated on the Racketeer Influenced and Corrupt Organizations Act of 1970. 18 U.S.C. §§ 1964(a) and (c). Plaintiff alleges that defendants participated in a scheme to obtain government contracts through the corruption of public officials, and that the controller unwittingly approved these illegal contracts for the City of Pittsburgh ("City") in the sum of $150,000. Defendants have filed motions to dismiss under Fed.R.Civ.P. 12(b) contending that plaintiff lacks standing. After reviewing the complaint and exhibits thereto, we find that plaintiff has suffered no injury, real or threatened, for which relief can be granted. The complaint will be dismissed for want of jurisdiction.

 I. History of Case

 The instant controversy arises following a number of successful prosecutions involving Computer Technology Associates, Inc. (CTA), and others, in the United States District Court for the Middle District of Pennsylvania. According to the complaint, defendants, Torquato, Ellis and Stoneman, doing business in California as CTA, Ltd., induced Robert Stone, a member of Council of the City of Pittsburgh, to advocate the company for a contract to recover Social Security overpayments made by the City and its employees. Defendant, Ronald Schmeiser, Finance Director of the City, was named for his participation in the contract. The complaint alleges that plaintiff, as controller, signed the CTA contract in good faith when presented by Schmeiser.

 Plaintiff alleges that the act of signing the unlawful contract injured his "property and business" in several respects. First, the controller's office spent time and resources to conduct an audit of CTA's work under the contract. Second, an additional expenditure of personnel time was required to perform again the Social Security recovery work and for re-auditing of that work. Third, plaintiff is personally liable for the $150,000 spent under the CTA contract because Section 406 of the Pittsburgh Home Rule Charter renders the controller and all sureties jointly and severally liable for all funds unlawfully disbursed.

 Defendants, Schmeiser, Stone, Herbert and Ellis have moved to dismiss for lack of standing. In addition, defendants, Schmeiser and Stone have moved for attorney's fees under Fed.R.Civ.P. 11.

 II. Discussion

 When faced with a motion to dismiss, a district court must determine whether the allegations of the complaint, taken as true and in a light most favorable to the plaintiff, state a claim recognized at law and upon which relief can be granted. Hughes v. Rowe, 449 U.S. 5, 66 L. Ed. 2d 163, 101 S. Ct. 173 (1980). To make such a determination, the court must consider the allegations of the complaint and exhibits attached thereto, and take judicial notice of relevant laws. Iacaponi v. New Amsterdam Casualty Co., 379 F.2d 311 (3d Cir. 1967), cert. denied, 389 U.S. 1054, 19 L. Ed. 2d 849, 88 S. Ct. 802 (1968). Defendants challenge the instant complaint on the ground that no injury is alleged and, therefore, no relief can be granted.

 Actual or threatened injury is a precedent to recovery in federal court. As the Supreme Court stated in Los Angeles v. Lyons, 461 U.S. 95, 101, 75 L. Ed. 2d 675, 103 S. Ct. 1660 (1983), abstract injury is not enough for a plaintiff to state a claim recognized under the "case or controversy" requirement of Article III of the United States Constitution. A plaintiff must show that he "has sustained or is immediately in danger of sustaining some direct injury" as the result of the challenged official conduct and the injury or threat of injury must be both "real and immediate," not conjectural or hypothetical. Id. at 102.

 The requirement of actual injury assures that "the legal questions presented to the court will be resolved, not in the rarified [sic] atmosphere of a debating society, but in a concrete factual context conducive to a realistic appreciation of the consequences of judicial action." Valley Forge College v. Americans United, 454 U.S. 464, 472, 70 L. Ed. 2d 700, 102 S. Ct. 752 (1982). A federal court does not place its imprimatur upon the actions of a plaintiff or defendant; it seeks only to grant relief where the plaintiff has been injured wrongfully by the defendant. Article III, therefore, restricts the exercise of judicial power, which can "so profoundly affect the lives, liberty, and property of those to whom it extends," to litigants "who can show injury in fact resulting from the action which they seek to have the Court adjudicate." Valley Forge College, supra at 473.

 In the instant case, the Controller asserts jurisdiction under Sections 1964(a) and (c) of the Racketeer Influenced Corrupt Organizations Act of 1970. 18 U.S.C. §§ 1964(a) and (c). Section 1964(c) states:

 
Any person injured in his business or property by reason of a (RICO) violation . . . 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.

 Plaintiff states that his "property" has been injured because he is strictly liable to the City for $150,000 for approving a fraudulent contract for CTA. His second alleged injury is to his "business" in that the controller's office had to divert time and resources to conduct an ...


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