Antitrust Law Daily Wrap Up, RICO—E.D. Mich.: Blackballing allegations by packaged-ice salesman insufficient to establish RICO violation, (Aug 18, 2016)

By Mark Engstrom, J.D.

A former salesman for a packaged-ice distributor failed to show that a competing distributor had violated RICO—by committing the predicate acts of wire fraud, obstruction of justice, and witness tampering—as part of an industry-wide conspiracy to blackball him for his cooperation with a federal investigation, the federal district court in Detroit has ruled. The salesman’s RICO claims against the competing distributor were dismissed on summary judgment (McNulty v. Home City Ice Co., August 17, 2016, Borman, P.).

Lawsuit. Packaged-ice salesman Martin McNulty brought RICO and antitrust claims against Home City Ice Co. and other individuals and entities in the packaged-ice industry, including his former employer, Arctic Glacier. According to McNulty, the defendants had engaged in a racketeering scheme to: (1) terminate him from Arctic Glacier for refusing to participate in an unlawful market-allocation scheme and (2) boycott him from further employment in the packaged-ice industry in retaliation for his cooperation with a federal investigation into an antitrust scheme.

Summary judgment. The court addressed Home City’s motion for summary judgment on the one remaining claim in the case: a RICO violation by Home City. To establish Home City’s liability on that claim, McNulty had to prove that Home City had committed at least two predicate acts in furtherance of an alleged scheme to boycott McNulty.

According to McNulty, a jury could find that Home City had committed at least five predicate acts in furtherance of the boycotting scheme. More specifically, McNulty argued that genuine issues of material fact were present because a reasonable juror could conclude that Home City had: (1) conspired with Arctic Glacier and others—to retaliate against McNulty as a witness—by agreeing to McNulty’s termination if he refused to actively participate in, and cover up, the market-allocation conspiracy; (2) conspired with other members of the enterprise, after McNulty had contacted government authorities, in an effort to tamper with McNulty as a witness; (3) retaliated against McNulty—for cooperating with the government—by declining to consider his employment application and falsely responding to his follow up phone call by denying the existence of a job opening; (4) retaliated against McNulty by failing to contact him about a position that was open following the death of the company’s Vice President of Sales; and (5) conspired with others to offer McNulty a $10,000 bribe if he agreed to cease his cooperation with the federal government in its antitrust investigation of the packaged-ice industry.

Witness tampering. The court found that McNulty failed to produce sufficient evidence of Home City’s conspiracy to tamper with McNulty, in violation of 18 U.S.C. §1512(k), when Home City learned that McNulty had begun to cooperate with government authorities in their investigation of a market-allocation scheme.

McNulty’s witness-tampering argument relied on a letter that he had sent to Michigan’s Consumer Protection Division. The letter included details about the unlawful activities of Arctic Glacier and others, and it expressed his desire to file a formal complaint against Arctic Glacier.

McNulty also relied on a statement by an Arctic Glacier employee who allegedly told McNulty that the employee had a relationship with Home City that would allow him to "enforce a boycott" against McNulty. In McNulty’s view, that statement was an attempted bribe that was made within the scope of the conspiracy.

Shortly thereafter, McNulty received a call from a business associate who told McNulty that he was calling on behalf of Arctic Glacier, who wanted to meet with him about rehiring him or offering him a "monetary incentive" to make him "happy." In support of those statements, McNulty relied on his own deposition, his own declaration, a letter that he had written to the DOJ, and his own responses to interrogatories.

According to the court, the statements that the Arctic Glacier employee had made about his alleged ability to control the hiring practices of Home City "did not demonstrate that Home City was aware of and intended to participate in an endeavor to tamper with McNulty’s cooperation with the government." Moreover, none of McNulty’s evidence directly implicated Home City or permitted the reasonable inference that Home City knew about, or was involved in, the alleged attempt to bribe McNulty.

In the court’s view, a juror would have to infer that Home City knew that McNulty had written a letter to the State of Michigan, and that Home City was aware of the business associate’s actions in response to that letter, based on: (1) Home City’s participation in the market-allocation conspiracy and (2) statements that were made by an Arctic Glacier employee that the employee had the power to enforce a boycott. That, the court explained, was both an inference based on an inference and hearsay based on hearsay.

Ultimately, McNulty failed to produce sufficient evidence for a reasonable juror to conclude that Home City knew about—and agreed to—the business associate’s attempt to arrange a meeting to discuss a bribe. Consequently, a reasonable juror could not conclude that Home City had committed the predicate act of conspiring to tamper with McNulty as a witness in a government investigation.

Termination of employment. According to the court, McNulty failed to provide sufficient evidence to support his claim that Home City had conspired to retaliate against him, in violation of 18 U.S.C. §1513(f), by agreeing to his termination as retaliation for cooperating with the government.

McNulty’s termination-as-retaliation arguments relied heavily on his own declarations, the court noted, and nothing in the evidence indicated that Home City and Arctic Glacier had agreed that McNulty’s employment should be terminated as retaliation for his anticipated cooperation with the government.

Other evidence—a scribbled note on a calendar page, the hiring of an unqualified sales manager to replace McNulty, and email communications between employees of Arctic Glacier—were similarly insufficient. Nothing in McNulty’s evidence allowed a juror to reasonably infer that Home City had committed the predicate act of conspiring with Arctic Glacier, to effect McNulty’s termination, as retaliation for becoming (or to dissuade him from acting as) a government witness.

Blackballing. The court found that McNulty’s evidence was insufficient to allow a reasonable juror to conclude that Home City had retaliated against McNulty by refusing to hire him based on his cooperation with the government. Similarly, the evidence did not allow a reasonable juror to conclude that the alleged retaliation was the "but for" and proximate cause of McNulty’s racketeering injury.

According to McNulty, Home City refused to hire him even though other employers thought his resume was "impressive," and despite a former colleague’s opinion that Home City would incur no cost by hiring McNulty as a commission-based contractor. McNulty noted that he was later told—by a former colleague and another insider—that McNulty was being blackballed by Home City. He supported that assertion with his own deposition testimony, which referred to taped conversations with those individuals.

McNulty also noted that he had called Home City to follow up on his employment application, but was told that Home City had no sales openings. According to McNulty, that statement was a fraudulent communication that violated the wire fraud statute, and thus constituted an additional predicate act.

In the court’s view, McNulty’s evidence fell "far short" of the basic pleading requirements, and fell "shorter still" from his heightened pleading burden—under Rule 9(b) of the Federal Rules of Civil Procedure-to proffer sufficient evidence to support his claims. Moreover, Home City had responded—with unrebutted evidence—that the statements of its employees were true because: (1) Home City had no openings and (2) no sales person was hired when McNulty submitted his application in September of 2005 (and for many years thereafter).

In support of his assertion that he was being blackballed, McNulty cited his own deposition testimony, but provided no evidence to show that Home City had hired other sales personnel at the time of his inquiry, or at any time thereafter. McNulty argued that he could have "won new business" for Home City "as a contractor," and further argued that Home City had no reason not to hire him. Those assertions were "pure conjecture," the court explained, and the unrebutted evidence showed that Home City did not use independent contractors until 2013. In the court’s view, no reasonable juror could conclude that Home City had committed wire fraud by informing McNulty that the company was not hiring sales personnel.

Because Home City’s evidence—that it was not hiring at the time of McNulty’s application (or at anytime thereafter)—was undisputed by anything other than McNulty’s conjecture, McNulty could not establish the necessary element of causation for the alleged act of witness retaliation.

Ultimately, McNulty failed to produce sufficient evidence that would allow a reasonable juror to conclude that the predicate act of retaliation was the "but for" and proximate cause of McNulty’s injury. The undisputed evidence showed that Home City was not hiring sales people in any capacity at the time of McNulty’s application—and for years before or after that time—and thus would not have hired McNulty for any reason. For those reasons, McNulty could not establish RICO liability based on Home City’s alleged retaliation through blackballing.

Blackballing redux. The court found that the record evidence would not permit a reasonable juror to conclude that: (1) Home City had retaliated against McNulty by not offering him the position of Vice President of Sales after the prior VP had died or (2) the alleged retaliation was the "but for" and proximate cause of McNulty's injury.

Conspiracy to bribe. The court decided that insufficient evidence was proffered regarding Home City’s conspiracy to offer McNulty a bribe of at least $10,000 if he agreed to cease his cooperation with the FBI and the DOJ in their antitrust investigation of the packaged-ice industry. McNulty’s assertion that Home City and Arctic Glacier had "agreed on a plan of action" was not supported by the evidence.

Conclusion. Because McNulty failed to prove that Home City had committed at least two predicate acts, as required by RICO, his racketeering claims were deficient. Summary judgment in favor of Home City was therefore warranted.

The case is No. 08-cv-13178.

Attorneys: Andrew A. Paterson, Jr. (Paterson Law Office) for Martin G. McNulty. John B. Pinney (Graydon, Head & Ritchey, LLP) and Sanford M. Litvack (Hogan Lovells US LLP) for Home City Ice Co., Inc.

Companies: Home City Ice Co.

Cases: RICO MichiganNews