Antitrust Law Daily Wrap Up, RICO—5th Cir.: Auto repair shop owner failed to allege RICO claim in Mercedes parts case, (Jun 16, 2015)

By Greg Hammond, J.D.

An automobile repair shop owner failed to adequately allege a pattern of racketeering activity, continuity, or the existence of an enterprise in support of claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), the U.S. Court of Appeals in New Orleans determined. The lower court’s decision granting summary judgment in favor of defendants was therefore affirmed with regard to the RICO claim (Zastrow v. Houston Auto Imports Greenway Limited, June 12, 2015, Clement, E.).

Background. Plaintiff Mark Zastrow owns Heights Autohaus, an automobile repair shop that conducts mechanical repairs on German cars. Zastrow previously purchased Mercedes-Benz parts from Houston Auto M. Imports, Ltd., doing business as Mercedes-Benz of Houston Greenway, at a 25 percent discount. However, after agreeing to testify as an expert witness in a separate case, Zastrow received a call from Mercedes Greenway, stating that he would regret it if he sat for a scheduled deposition. Zastrow appeared for his deposition and Mercedes Greenway later severed the dealership’s business relationship with Zastrow. Zastrow filed suit, alleging that Mercedes Greenway threatened him to prevent him from testifying and retaliated against him by refusing to sell him auto parts after he gave his deposition. The lower court granted summary judgment in favor of the defendants on all claims. Zastrow appealed judgment as to his claims under RICO and 42 U.S.C. §§ 1981 and 1982.

RICO claim. The court rejected Zastrow’s argument that the lower court erred in granting summary judgment to the defendants on his civil RICO claim. First, the claim failed because Zastrow could not show a pattern of racketeering activity. The telephone call warning him not to testify was, at best, a single predicate act. A later phone call and letter terminating Mercedes Greenway’s business relationship with Zastrow were not attempts to obstruct or impede the proceeding because there was no threat of further penalty.

Second, even if the two phone calls and letter constituted three predicate acts, Zastrow still failed to satisfy the continuity requirement, the court found, noting that where all of the alleged predicate acts took place in the context of defending a lawsuit, the unlawful conduct did not constitute or threaten long-term criminal activity.

Lastly, Zastrow failed to set forth evidence demonstrating the existence of an enterprise. The court concluded that the complaint alleged an enterprise created by the alleged racketeering activity itself, which is “obviously not sufficient to plead the existence of an enterprise ‘separate and apart from the pattern of racketeering activity in which it engages.’” Summary judgment on the RICO claim was therefore affirmed.

Racial discrimination claims. The lower court’s decision granting summary judgment over Zastrow’s racial discrimination claim under Section 1981 was vacated, however. The court found that because Zastrow alleged that Mercedes Greenway refused to sell him parts after he testified in support of discrimination claims, he has stated a claim for retaliation under § 1981.

The case number is 14-20359.

Attorneys: Reginald Edmund McKamie, Sr. (Law Offices of Reginald E. McKamie, Sr.) for Mark Zastrow. Daniel John Kasprzak (Johnson, DeLuca, Kurisky & Gould, PC) for Houston Auto Imports Greenway Ltd.

Companies: Heights Autohaus; Houston Auto Imports Greenway Limited

Cases: RICO LouisianaNews MississippiNews TexasNews