Galaxy Distributing of West Virginia, Inc. v. Standard Distributing, Inc.
Filing
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MEMORANDUM OPINION & ORDER dismissing Galaxy Distributing of West Virginia, Inc.'s 1 Complaint for lack of subject matter jurisdiction over the claims asserted; denying as moot Standard Distributing Inc.'s 4 Motion to Dismiss; directing that this case be DISMISSED and STRICKEN from the docket. Signed by Judge Joseph R. Goodwin on 7/16/2015. (cc: counsel of record; any unrepresented party) (taq)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
GALAXY DISTRIBUTING OF
WEST VIRGINIA, INC., et al.,
Plaintiffs,
v.
CIVIL ACTION NO. 2:15-cv-04273
STANDARD DISTRIBUTING, INC.,
Defendant.
MEMORANDUM OPINION & ORDER
Pending before the court is the defendant’s Motion to Dismiss Pursuant to Rule 12(b)(1),
12(b)(2) and 12(b)(6) [Docket 4]. The Motion, having been fully briefed by the parties, is now
ripe for review. Based on the reasoning set forth below, the Motion is DENIED AS MOOT.
I.
Background
Galaxy Distributing of West Virginia, Inc. (“Galaxy”) and Standard Distributing Inc.
(“Standard”) are competing wine and beer distributors doing business in West Virginia. Galaxy
and its licensed representative Shawn Rucker brought the pending suit against Standard, alleging
that Standard sent two fraudulent emails to Galaxy’s customers in the fall of last year. 1 The facts
leading up to the lawsuit, viewed in the light most favorable to Galaxy, are as follows:
On October 21, 2014, Galaxy learned about an email (the “October email”) received by
one of its customers, Food Lion, a food and wine retailer in North Carolina. (Compl. [Docket 1]
¶ 16). The email stated:
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Both Galaxy and Mr. Rucker are plaintiffs in this matter. I refer to them collectively as “Galaxy.”
Hi Mike we here at Galaxy made a mistake about Candoni Wines that are in your
stores. Under West Virginia Law Standard Distributing has 90day’s [sic] to sell
their goods. And keep the authorizations. We have included a copy of the Law[.]
(Ex. A, Email (Oct. 21, 2014) [Docket 1-2]). The email was signed “Shawn Rucker, Pricing &
Programming Coordinator, Galaxy Distributing of West Virginia” and came from the email
address galaxywines@outlook.com. (Id.). Food Lion forwarded the email to Candoni Wines, one
of Food Lion’s wine suppliers, who then notified Galaxy. (Compl. [Docket 1] ¶ 20). Galaxy and
Mr. Rucker claim they have never used this email address and had no knowledge of the email.
(Id. ¶ 18). Notably, Galaxy had recently acquired the right to distribute the Candoni Wines
brand, which was previously held by Standard. (Id.).
Galaxy learned of a second email on November 5, 2014 (the “November email”). The
email was received by Galaxy’s customer Breitenbach Winery, a wine supplier in Ohio, and
stated: “Tell Scott that i [sic] will put the wine on sale when i’m dam [sic] good and ready.” (Id.
¶ 22–23; see also Ex. B, Email (Nov. 5, 2014) [Docket 1-3]). Like the October email, the
November
email
came
from
“Shawn
Rucker”
using
the
same
address,
galaxywines@outlook.com. (Compl. [Docket 1] ¶ 22). And as with Candoni Wines, Galaxy had
recently acquired the right to distribute Breitenbach Wine, which was previously distributed by
Standard. (Id. ¶ 24).
After learning about the October email, Galaxy filed a civil action in Kanawha County
Circuit Court. (Id. ¶ 29). Galaxy issued a subpoena duces tectum to Microsoft Corporation on
October 28, 2014, requesting subscriber information related to the unknown email account, along
with billing information and internet connection logs. (Id. ¶ 30). Microsoft produced the
requested information on January 14, 2015. (Id. ¶ 31). Microsoft determined that the account is
registered under the name “Mr. Rucker”; logins to the account originate from the IP address
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208.180.137.35, which is owned by the internet service provider Suddenlink Communications;
the domain name assigned to the IP address is “remote.standarddistwv.com”; and emails were
sent from the account on October 21, 2014, October 30, 2014, and November 5, 2014. (Id.).
Galaxy subsequently issued a subpoena duces tectum to Suddenlink, requesting
information related to the IP address and domain name. (Id. ¶ 32). Suddenlink responded by
letter dated January 26, 2015, informing Galaxy that the information requested could not be
produced without a court order. (Id. ¶ 33; see also Ex. G, Letter from Suddenlink to Galaxy (Jan.
26, 2015) [Docket 1-8]). On February 6, 2015, before Galaxy could file a motion for court order,
Standard appeared in the circuit court proceedings. (Compl. [Docket 1] ¶ 34). Standard filed a
motion to quash the subpoena issued to Suddenlink and a motion to intervene. (Id.). Interpreting
Standard’s actions as an admission to owning the email account and sending the fraudulent
emails, Galaxy filed the instant action on April 8, 2015. (Id. ¶ 35).
Galaxy’s Complaint alleges that Standard, by portraying itself as Galaxy and Mr. Rucker
in these unauthorized emails, “has engaged in intentional and malicious acts of interference with
[Galaxy’s] business relationships.” (Id. ¶ 37). Galaxy claims that Standard’s conduct has caused
material harm, including “emotional distress, loss of good will, damage to reputation, loss of
sales[,] and loss of profits.” (Id. ¶ 41). Accordingly, Galaxy asks the court to provide it with
equitable relief. Count I of its Complaint requests an order, pursuant to the Declaratory Judgment
Act, declaring that Standard violated four federal statutes: (1) 18 U.S.C. § 1001, criminal fraud;
(2) 18 U.S.C. § 1028(a)(7), criminal identity theft; (3) 18 U.S.C. § 1343, criminal wire fraud; and
(4) 18 U.S.C. § 1961, the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Count
II asks for a preliminary and permanent injunction requiring Standard to stop all fraudulent
activity. Importantly, Galaxy is not seeking relief in the form of monetary damages.
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On April 28, 2015, Standard moved to dismiss Galaxy’s Complaint on a number of
grounds. (Mot. to Dismiss Pursuant to Rule 12(b)(1), 12(b)(2) & 12(b)(6) [Docket 4]). A hearing
on Standard’s Motion was held on July 7, 2015. (Daybook Entry [Docket 18]). At the hearing,
Standard—though admitting its IP address was the source of the emails—denied any
responsibility and primarily argued that Galaxy’s claims should be dismissed as inadequately
pled. I cannot reach that issue, however, because, as explained below, the remedial action Galaxy
requests in its Complaint exceeds this court’s jurisdiction.
II.
Legal Standard
The issue raised by this case—whether a private, equitable remedy should be afforded for
violation federal statutes that do not expressly provide for an equitable remedy—exists at the
intersection of several jurisdictional concepts: subject-matter jurisdiction, standing, implication
of a private cause of action, and relief. See Religious Tech. Ctr. v. Wollersheim, 796 F.2d 1076,
1079 (9th Cir. 1986) (explaining that under these circumstances, jurisdictional concepts
“overlap . . . even more than they ordinarily would” (quoting Nat’l R.R. Passenger Corp. v. Nat’l
Ass’n of R.R. Passengers, 414 U.S. 453, 455–56 (1974))). As the court did in Wollersheim, I opt
to treat the issue as a “generic problem of ‘federal jurisdiction’ without attempting to
characterize it with greater specificity.” Id. A federal court must dismiss a case sua sponte if it
appears at any time during the proceedings that its exercise of jurisdiction would be improper.
See Brickwood Contractors, Inc. v. Datanet Eng’g, Inc., 369 F.3d 385, 390 (4th Cir. 2004); Fed.
R. Civ. P. 12(h)(3) (“If the court determines at any time that it lacks subject matter jurisdiction,
the court must dismiss the action.”).
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III.
Discussion
I FIND this court lacks subject matter jurisdiction over this action because the federal
claims stated by Galaxy do not provide for the private, equitable relief it has requested. Three of
the statutes under which Galaxy seeks relief—§§ 1001, 1028, and 1343—are criminal statutes
with no civil components. The remaining statute, RICO, though providing for a civil cause of
action in damages, does not expressly or implicitly create a private right of action for equitable
relief, the only form of relief sought by Galaxy.
A. 18 U.S.C. §§ 1001, 1028(a)(7), and 1343
Galaxy claims that Standard “engaged in illegal fraudulent acts under 18 U.S.C. § 1001,”
(Compl. [Docket 1] ¶¶ 49–51); “engaged in illegal identity theft and fraud under 18 U.S.C.
§ 1028(a)(7),” (id. ¶¶ 52–54); and “engaged in illegal wire fraud under 18 U.S.C. § 1343,” (id. at
55–58). Galaxy asks the court to “enter an Order declaring that Standard violated Plaintiffs’
rights under [these statutes].” (Id. ¶ 66). Galaxy, however, as a private plaintiff, does not have
any rights under these statutes.
Section 1001, in short, prohibits false, fraudulent, or fictitious representations of material
fact “in any matter within the executive, legislative, or judicial branch of the Government of the
United States.” 18 U.S.C. § 1001(a) (2012). The Fourth Circuit Court of Appeals has held that
§ 1001 is a criminal code provision, and there is “no basis for implying a civil cause of action”
from it. Fed. Sav. & Loan Ins. Corp. v. Reeves, 816 F.2d 130, 137 (4th Cir. 1987). The Fourth
Circuit has reached the same conclusion with respect to § 1028(a)(7), which criminalizes identity
theft, see Rahmani v. Resorts Int’l Hotel, Inc., 20 F. Supp. 2d 932, 937 (E.D. Va. 1998), aff’d
182 F.3d 909 (4th Cir. 1999) (dismissing a civil plaintiff’s § 1028 claim because § 1028 “do[es]
not provide for any private cause of action”), and with respect to § 1343, which criminalizes
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fraud by means of wire, radio, or television communication, see Tribble v. Reedy, 888 F.2d 1387,
*1 (4th Cir. 1989) (unpublished table decision) (holding that § 1343 is a “bare criminal statute”
and provides no basis for a private right of action). Therefore, to the extent Galaxy’s Complaint
seeks declaration of private rights under §§ 1001, 1028(a)(7), or 1343, its claims are
DISMISSED.
B. RICO
Although §§ 1028(a)(7) and 1343 do not provide private rights of action on their own,
violation of these statutes can serve as predicate acts for a claim under RICO § 1964(c), which
provides a civil cause of action for victims of criminal racketeering activity:
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[.]
18 U.S.C. § 1964(c). In other words, § 1964(c) allows a civil plaintiff to sue for treble damages if
the defendant violated § 1962 and, as a result, caused injury to the plaintiff in his business or
property. In turn, “[a] violation of § 1962(c), the section on which [Galaxy] relies, requires (1)
conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Sedima, S.P.R.L.
v. Imrex Co., 473 U.S. 479, 496 (1985). The prohibitions set forth in §§ 1028(a)(7) and 1343 are
included in the definition of “racketeering activity.” Id. § 1961(1).2 Therefore, whether Standard
violated these statutes is relevant to evaluation of Galaxy’s RICO cause of action.
I need not get this far in my analysis, however, to conclude that this case must be
dismissed. Galaxy has only requested equitable relief, and, although the courts are split on the
issue, compare Wollersheim, 796 F.2d at 1077 (finding that RICO does not provide private
plaintiffs with equitable relief), with Nat’l Org. for Women, Inc. v. Scheidler, 267 F.3d 687, 698
2
At the hearing on this matter, Galaxy conceded that § 1001 is not included as “racketeering activity” under RICO.
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(7th Cir. 2001) (finding that RICO authorizes private parties to seek injunctive relief), I conclude
that RICO cannot be used as a vehicle for a private cause of action in equity. This conclusion
aligns with the holding of a fellow district judge within the Fourth Circuit, who, relying on the
Ninth Circuit’s reasoning in Wollersheim, declined to recognize equitable relief under RICO. See
Minter v. Wells Fargo Bank, N.A., 593 F. Supp. 2d 788, 794–96 (D. Md. 2009).
The Wollersheim court began with a textual analysis of § 1964:3
Section 1964 has four parts. Part (c) was added late in RICO’s legislative passage
through Congress. The bill passed by the Senate included only the present parts
(a), (b), and (d). [citations omitted]. Part (a) is a broad grant of equitable
jurisdiction to the federal courts. Part (b) permits the government to bring actions
for equitable relief. Part (d) grants collateral estoppel effect to a criminal
conviction in a subsequent civil action by the government. Part (c), the private
civil RICO provision, states that a private plaintiff may recover treble damages,
costs and attorney’s fees. In contrast to part (b), there is no express authority to
private plaintiffs to seek the equitable relief available under part (a).
Admittedly, part (c) also does not expressly limit private plaintiffs “only” to the
enumerated remedies, nor does part (a) expressly limit the availability of the
illustrative equitable remedies to the government. See Strafer, Massumi, and
Skolnick, Civil RICO in the Public Interest: “Everybody’s Darling,” 19 Am.
Crim. L. Rev. 655, 710 (1982). However, the inclusion of a single statutory
reference to private plaintiffs, and the identification of a damages and fees remedy
for such plaintiffs in part (c), logically carries the negative implication that no
other remedy was intended to be conferred on private plaintiffs.
Wollersheim, 796 F.2d at 1082–83 (footnotes omitted) (emphasis in original). Though agreeing
that § 1964(c) may have other plausible readings, the Ninth Circuit found these readings
incorrect based on RICO’s legislative history:
[T]wo separate episodes from the history of civil RICO’s legislative passage
convince us that the conclusions the [plaintiff] would have us draw from [other]
congressional statements do not reflect Congress’[s] intent in section 1964. First,
the House rejected an amendment, described as “an additional civil remedy,”
which would expressly permit private parties to sue for injunctive relief under
section 1964(a). Second, in the very next year after RICO’s enactment, Congress
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This analysis is particularly relevant in this case because, at the hearing on Standard’s Motion, Galaxy’s counsel
emphasized the text of § 1964 in his argument that RICO provides for injunctive relief.
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refused to enact a bill to amend section 1964 and give private plaintiffs injunctive
relief.
Id. at 1985 (emphasis in original).
The Ninth Circuit was also persuaded by the similarities between RICO and the treble
damages provision of the Clayton Act, 15 U.S.C. § 15(a), which the Supreme Court has held
precludes private injunctive relief. See Wollersheim, 796 F.2d at 1086–87 (quoting Paine
Lumber Co. v. Neal, 244 U.S. 459, 471 (1917)). Finally, the Ninth Circuit found expansion of
civil RICO to be inconsistent with Supreme Court doctrine on the limitations of implying causes
of action or remedies not expressly stated by statute. See id. at 1088 (“In the absence of strong
indicia of a contrary congressional intent, we are compelled to conclude that Congress provided
precisely the remedies it considered appropriate.” (quoting Middlesex Cnty. Sewerage Auth. v.
Nat’l Sea Clammers Ass’n, 453 U.S. 1, 14 (1981))).
For these reasons, the Ninth Circuit concluded that Congress “did not intend to give
private RICO plaintiffs access to equitable remedies.” Id. at 1087. Although the Fourth Circuit
has yet to expressly address this issue, dictum indicates that the Fourth Circuit would stand with
Wollersheim. See Johnson v. Collins Entm’t Co., Inc., 199 F.3d 710, 726 (4th Cir. 1999)
(“[T]here is substantial doubt whether RICO grants private parties . . . a cause of action for
equitable relief.” (quoting Dan River, Inc. v. Icahn, 701 F.2d 278, 290 (4th Cir. 1983))).
Accordingly, I join the Ninth Circuit and the United States District Court for the District of
Maryland and hold that equitable relief is not available under RICO. Because RICO does not
provide for Galaxy’s requested relief of declaratory judgment and permanent/preliminary
injunctions, the court does not have the power to hear this case. Galaxy’s RICO claims are
DISMISSED.
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IV.
Conclusion
Galaxy’s Complaint [Docket 1] is DISMISSED for lack of subject matter jurisdiction
over the claims asserted. Standard’s Motion to Dismiss [Docket 4] is DENIED AS MOOT. The
court ORDERS that this case be DISMISSED and STRICKEN from the docket. The court
further DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER:
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July 16, 2015
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