Commercial Litigation and Arbitration

RICO — Both Deprivation and Acquisition of Property Right Essential to Hobbs Act Predicate

From US Airline Pilots Ass’n v AWAPPA, LLC, 2008 U.S. Dist. LEXIS 106440 (W.D.N.C. July 11, 2008):

Until recently, the phrase "the obtaining of property from another" as found in the Hobbs Act was construed broadly by the courts. ***

In 2003, however, the Supreme Court significantly restricted the scope of the phrase "the obtaining the property from another" in Scheidler v. National Organization for Women, Inc., 537 U.S. 393, 123 S.Ct. 1057, 154 L.Ed.2d 991 (2003) ("Scheidler II"). In that case, the Supreme Court faced *** anti-abortion protestors who were attempting to shut down abortion clinics. *** The respondent clinics argued that the petitioners had violated the Hobbs Act by "seeking to get control of the use and disposition of respondents' property." ***The Supreme Court rejected the respondents' characterization of the petitioners' actions as an "obtaining of property from" the clinics, stating as follows:

[E]ven 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 or sought to deprive respondents of their alleged property right of 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.

Id. at 404-05, 123 S.Ct. at 1065-66 (internal citation and quotation marks omitted) (emphasis added). As the Second Circuit recently explained, Scheidler II makes clear that it is not enough to show merely that there was a deprivation or interference with the plaintiff's property right; rather, in order to show that a property right was "obtained", there must be both deprivation and acquisition of the property:

We read the Court's emphasis on the possibility of exercising, transferring, or selling the property as a concern with the extortionist's intent with respect to the property at issue. The ultimate goal of the anti-abortion protestors in Scheidler II was merely shutting down a clinic that performed abortions. This did not constitute acquisition in the eyes of the Scheidler II Court, we believe, because there was no further intended activity on the part of the protestors, and mere interference with the clinics' right to conduct their business, even to the point of getting them to cease conducting their business altogether, was closer to coercion than extortion. But had the protestors sought to take further action after having deprived the clinics of their right to conduct their business as they wished — by, for example, forcing the clinic staff to provide different types of services, forcing the clinic to turn its operations over to the protestors, or selling the clinic or its property to a third party, we believe that they would have satisfied the Scheidler II Court's definition of "obtaining."

United States v. Gotti, 459 F.3d 296, 323-24 (2d Cir. 2006) (internal citation, quotation marks, and footnote omitted), cert. denied sub nom. Ciccone v. United States, 127 S.Ct. 3001, 168 L.Ed.2d 726 (2007).

In the present case, USAPA has asserted that the Defendants are attempting to destroy USAPA and to obtain from the union and its members various intangible property rights, including USAPA's right to serve as the collective bargaining representative for the US Airways pilots; USAPA's right to collect membership dues and agency fees from the pilot group; the rights of USAPA members to exercise rights under the Labor-Management Reporting and Disclosure Act, 29 U.S.C. §401, et seq.; and USAPA's right to determine the pilots' terms and conditions of employment, including the terms under which the seniority lists of the East pilots and West pilots will be integrated. *** The Defendants do not dispute that USAPA has satisfied the "property" prong of the Hobbs Act with these allegations, *** and the Court agrees that a property right has been alleged sufficiently.

Where USAPA's allegations fall short, however, is in satisfying the "obtaining" prong of the extortion statute. The Amended Complaint is replete with allegations that the Defendants' actions have deprived USAPA of its property rights and have interfered with the exercise of such rights to such an extent that the union's ability to continue its representation of the collective bargaining unit has been compromised. See Amended Complaint***. It cannot be reasonably inferred from the factual allegations in the Amended Complaint, however, that in so doing, the Defendant acquired or attempted to acquire any of these claimed rights from USAPA. Even assuming the truth of USAPA's allegations — that the Defendants sought to destroy USAPA and deprive it of its right to represent the collective bargaining unit -- such allegations merely establish that the Defendants sought to deprive the union of these property rights. Without an allegation that the Defendants sought to acquire these rights, the Amended Complaint fails to allege facts from which the Court can conclude that the Defendants "pursued nor received something of value from [USAPA] that they could exercise, transfer, or sell." Scheidler II, at 405, 123 S.Ct. at 1066. Like the anti-abortion protestors in Scheidler II, whose ultimate goal was to shut down the respondent abortion clinics, the Plaintiff alleges that the ultimate goal of the Defendants in this case is "to destroy USAPA and render it incapable of discharging the legal duty to represent the US Airways pilots" by attempting to drive up USAPA's costs of doing business (such as sabotaging the toll-free phone service, filing frivolous grievances, and imposing unnecessary postage costs) and by driving down its revenues (by attempting to intimidate pilots who paid dues or otherwise supported USAPA, by acting in concert to refuse to pay dues to USAPA, and by engaging in a "jump seat boycott" of USAPA members). *** While such allegations clearly establish an attempt to deprive or interfere with USAPA's property rights, they fail to meet the element of AWAPPA and the other Defendants attempting to acquire those rights from USAPA. The stated goal of AWAPPA is clear; since its formation, AWAPPA has sought to destroy USAPA and render it incapable of continuing in its capacity as the representative of the US Airways pilots. *** With these stated goals, AWAPPA does not stand to receive something of value from USAPA that AWAPPA could "exercise, transfer, or sell." See Scheidler II, 537 U.S. at 405, 123 S.Ct. at 1066. Absent allegations that the Defendants "obtained" property rights from USAPA, the Amended Complaint at best states a claim for coercion. As the Scheidler II Court explained, "[t]he crime of coercion ... involves the use of force or threat of force to restrict another's freedom of action," and is not a crime within the scope of the Hobbs Act, *** and thus is insufficient to support a civil claim under RICO.

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