United States v. Larson

807 F.Supp.2d 142

UNITED STATES of America,

v.Carl A. LARSON, et al., Defendants.

No. 07–CR–304S.

United States District Court, W.D. New York.

Aug. 10, 2011.

Thomas J. Eoannou, Buffalo, NY, for Defendants.

DECISION AND ORDER

WILLIAM M. SKRETNY, Chief Judge.

I. INTRODUCTION

This is a criminal action brought against Defendants Carl A. Larson, James L. Minter III, Mark N. Kirsch, Gerald H. Franz, Jr., Jeffrey A. Peterson, Gerald E. Bove, Michael J. Caggiano, Jeffrey C. Lennon, Kenneth Edbauer, George Dewald, Michael Eddy, and Thomas Freedenberg.¹ (Superseding Indictment, Docket No. 4 (“Sup.Indict.”).)

Pending before this Court is the Report and Recommendation of the Honorable Hugh B. Scott, United States Magistrate Judge, filed October 12, 2010 (Docket No. 184), recommending that Defendants' motions to dismiss the Superseding Indictment (Docket Nos. 153, 155) be granted. On November 29, 2010, the government filed objections to the Report and Recommendation. (Docket No. 196.) After full briefing, this Court heard oral argument on June 14, 2011, and took the objections under advisement at that time. (Docket No. 226.)

For the reasons discussed below, having considered Judge Scott's Report & Recommendation, the parties' submissions, and the issues raised at oral argument, this Court will set aside Judge Scott's Report & Recommendation, grant the government's objections, and deny Defendants' motions to dismiss.

II. BACKGROUND

A. The Superseding Indictment

On April 1, 2008, the grand jury returned an eight-count superseding indictment against Defendants, charging them with one count of racketeering conspiracy under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(d), one count of Hobbs Act extortion conspiracy, 18 U.S.C. § 1951(a), and six counts of attempted Hobbs Act extortion. (Sup. Indict, Docket No. 4.) The indictment also includes a claim for RICO forfeiture under 18 U.S.C. section 1963. ( Id. at 60–62.)

1. Count One Allegations—Racketeering Conspiracy

Count One of the indictment alleges, generally, that Defendants, members of the International Union of Operating Engineers, Local 17, AFL–CIO (“Local 17”), were operating as a criminal enterprise with the objective of extorting property from various construction firms throughout Western New York. ( Id. at 2–5.) The criminal enterprise operated from about January 1997 to December 2007. ( Id. at 2.) Defendants Larson, Minter, Kirsch, and Franz were the “primary” figures within the criminal enterprise. ( Id. at 3–5.)

The purported objective of the Local 17 criminal enterprise was to obtain through extortion several types of property, including (1) the property of construction contractors consisting of wages and benefits to be paid pursuant to labor contracts with Local 17; (2) the property of non-union construction laborers consisting of the jobs being performed by those laborers, and the attendant wages and benefits; (3) the property right of construction contractors and businesses to make business decisions free from outside pressure; and (4) the property of construction contractors consisting of wages and benefit contributions paid by such contractors for “unwanted, unnecessary, and superfluous labor.” ( Id. at 5.) Defendants used various unlawful means to secure these objectives, including actual violence, threats, intimidation, sabotage of property, and attempted interruption of construction projects. ( See id. at 6–8.)

Defendants allegedly engaged in a conspiracy to conduct a pattern of racketeering activity. ( Id. at 8–9.) Eleven acts of racketeering are described. ( See id. at 10–32.) Each act consists of attempted extortion in violation of the Hobbs Act, 18 U.S.C. § 1951(a), and/or the New York Penal Law, see N.Y. Penal Law § 155.05(2)(e)(i) & (ii). Racketeering Act 11 alleges a conspiracy to commit extortion in violation of federal and state law. (Sup. Indict. at 29–32.)

Different Defendants are named as participants in each of the eleven acts. For example, Defendant Larson is the named actor with respect to Racketeering Act 1, an attempt to extort jobs and other forms of property from STS Construction of Western New York. (Sup. Indict. at 10–12.) Defendants Peterson, Larson, Minter, Franz and Dewald are the alleged participants in Racketeering Act 2, directed at Zoladz Construction Company. ( Id. at 12–15.)

2. Count Two—Hobbs Act Conspiracy

Count Two charges that Defendants engaged in a Hobbs Act conspiracy from about October 2003–December 2007, with the purpose of extorting the following types of property from Western New York construction contractors: (1) the property right to make business decisions free from pressure; (2) wages and benefits for “unwanted, unnecessary, and superfluous” labor; and (3) the jobs and associated wages and benefits of the employers' employees. ( Id. at 32–33.) The indictment lists 75 overt acts in furtherance of this conspiracy. ( Id. at 33–53.) These acts include telephone harassment, damaging construction equipment, making verbal threats, the stabbing of the president of STS Construction by Defendant Caggiano, and attempting to run a contractor employee's car off the road. ( See, e.g., id. at 33, 34–35, 37, 38.)

3. Counts Three Through Eight—Attempted Hobbs Act Extortion

Counts Three through Eight allege attempted Hobbs Act extortion against Western New York construction firms, based on the same conduct underlying Counts One and Two. ( Id. at 53–60.) Different Defendants are named in the various counts. ( Id.) Again, the charge is that Defendants attempted to extort from the victims (1) the right to make business decisions free from pressure; (2) wages and benefits for “unwanted, unnecessary, and superfluous” labor; and (3) the jobs of the contractor employees, with attendant wages and benefits. ( See, e.g., id. at 53–54 (allegations of attempts to extort from STS Construction).)

4. RICO Forfeiture

Finally, the indictment sets forth a claim for forfeiture of property and proceeds deriving from the criminal enterprise, along with benefits relating to Defendants' union positions, under 18 U.S.C. § 1963. ( Id. at 60–62.)

B. Procedural Background1. Defendants' Motions to Dismiss

On April 19, 2010, Defendants filed a joint motion to dismiss the Superseding Indictment. (Docket No. 153.) Defendants maintained that the charges in the indictment did not state a violation of the Hobbs Act under United States v. Enmons, 410 U.S. 396, 93 S.Ct. 1007, 35 L.Ed.2d 379 (1973). (Mem. in Supp. of Defs.' Joint Mot. Dismiss (Docket No. 154) at 2–5.) Nor did the alleged conduct constitute extortion under New York state law. ( Id. at 5–8.) Defendants also contended that the indictment should be dismissed as impermissibly vague to the extent it could be read to permit Hobbs Act and RICO liability for the conduct alleged therein. ( Id. at 11–12.)

Defendant Bove moved separately to dismiss on the ground that the indictment was facially insufficient because it did not allege the essential facts underlying the charges against him. (Mem. in Supp. of Def. Bove's Mot. Dismiss (Docket No. 156) at 1–15.) Defendant Bove also argued that the Hobbs Act is unconstitutional as applied in this case because it criminalizes protected speech and association. ( Id. at 16–23.) Finally, Defendant Bove contended that the Hobbs Act impermissibly fails to warn of the potential criminality of the conduct alleged in this case. ( Id. at 23–24.)

2. The Magistrate Judge's Recommendation

On October 12, 2010, the Honorable Hugh B. Scott, United States Magistrate Judge, issued a Report and Recommendation (Docket No. 184 (“R & R”)), recommending that Defendants' motions be granted and that the Superseding Indictment be dismissed. (R & R at 18.)

In evaluating the facial validity of the indictment, Judge Scott identified the key issue as whether Defendants, in engaging in the conduct alleged in the indictment, were pursuing lawful union objectives; namely, the attainment of work for Local 17's members that was not “unwanted or superfluous.” ( Id. at 12.) Judge Scott determined that the indictment failed on its face because it did not identify which services offered by Defendants were unwanted, superfluous, or fictitious, but instead relied on the conclusory allegation that the services Defendants sought to be provided were “superfluous” and “unwanted.” ( Id. at 13.) Judge Scott explained:

The Enmons reference to “unwanted” services is not to cover services refused by a non-union contractor; otherwise, any labor action against a non-union shop once those services are declined would constitute a Hobbs Act violation.

( Id.) The indictment also did not allege that Defendants sought personal payoffs or fictitious jobs for union members, so as to bring the conduct within the scope of the Hobbs Act. ( Id.)

Judge Scott concluded that Defendants' conduct, as alleged, was not for any unlawful purpose. Rather, it was aimed at the legitimate objective of obtaining union jobs from reluctant construction contractors, which Enmons recognizes as lawful labor action. ( Id.) Accordingly, the indictment failed to allege any Hobbs Act violations. ( Id.)

Next, Judge Scott considered whether the indictment properly alleged extortion under New York Penal Law. ( Id. at 14.) Judge Scott pointed out that under New York law, pursuit of legitimate union objectives is not punishable as extortion. ( Id.) Because Defendants' objectives here were legitimate, the RICO count could not be predicated on state law extortion allegations. ² ( Id.)

Judge Scott also addressed Defendant Bove's separate motion. Judge Scott rejected the argument that the indictment was facially insufficient for failure to allege the specific criminal conduct of each Defendant. ( Id. at 16.) However, Judge Scott agreed that the indictment failed to the extent it criminalized protected speech and association by union members. ( Id. at 17.) Under Giboney v. Empire Storage & Ice Co., 336 U.S....