F I L E D
United States Court of Appeals
Tenth Circuit
August 30, 2006
UNITED STATES CO URT O F APPEALS Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
JA M ES F. K EA RN EY ,
Plaintiff-Appellee-Cross-
Appellant,
v.
V IN CEN T D IM A N N A ; K EN A.
O V ERMA N ; M A RK H A N EY ;
FR AN K J. V ESSA , SR .; A N THONY
P. IAC OV ETTA; JIM M Y J. GO SE;
THOM AS S. LAHEY; JAM ES R.
SM ITH; KEN NETH C. PADGETT;
GEORGE A. GRAY; STEVEN W .
PA N CK ; PA U L M . PA ZEN ; JESUS
QUINON ES; DOU GLAS BRADER;
ANDREW A. RAM IREZ; DAVID No. 04-1439, 04-1443
NEIL, individually and as Director of (D.C. No. 03-CV-146)
the Police Protective Association of (D . Colo.)
the C ity and County of D enver;
M ARTIN VIGIL, individually and as
Director of the Police Protective
Association of the City and County of
Denver; JONATHYN PRIEST; AM Y
M A RTIN , M .D .; D A V ID J. B RUNO;
BRUNO, BRUNO & COLIN , P.C.;
M ICHAEL STACK, individually and
as an Officer and Director of the
Police Protective Association of the
City and County of D enver;
BERNARDO ARABALO, individually
and as an Officer and Director of the
Police Protective Association of the
C ity and C ounty of D enver; JO HN
W YCKOFF, individually and as an
Officer and Director of the Police
Protective Association of the City and
County of Denver; KIRK M ILLER,
individually and as an Officer and
Director of the Police Protective
Association of the City and County of
Denver; KEN NETH CH AV EZ,
individually and as an Officer and
Director of the Police Protective
Association of the City and County of
Denver; M AR CO K. VA SQUEZ;
M ICHA EL Q U IN O N ES; TH O M AS
DAVID SANCHEZ; DAVID
A BRAM S; G ER ALD R. WH ITM AN;
TIM OTHY LEARY; DAVID
TH OM AS; STEV EN EV ANS;
W ILLIAM M ITCHELL,
Defendants-Cross-Appellees,
and
PO LIC E PR OTEC TIV E
A SSO CIA TIO N O F TH E C ITY AND
COUNTY OF DENVER,
Defendant-Appellant-Cross-
Appellee.
OR DER AND JUDGM ENT *
Before BR ISC OE, M cKA Y, and EBEL, Circuit Judges.
*
This Order and Judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
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James Kearney, a private investigator, brought this civil claim under the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.
§§ 1961–68, against thirty-four individual defendants, a law firm, and a non-
profit corporation (collectively, “Defendants”). The district court granted
motions by all Defendants to dismiss for failure to state a claim, but denied a
motion by one Defendant for sanctions against Kearney. W e affirm the dismissal
of K earney’s claims but reverse and remand on the issue of sanctions.
I. BACKGROUND 1
On September 29, 1999, a SW AT team from the Denver Police Department
entered Ismael M ena’s residence pursuant to a “no-knock” search warrant that
mistakenly listed M ena’s address instead of the “crack house” next door. During
the raid, M ena was shot and killed. Although there was an initial cover-up, the
fact that the SW AT team had raided the wrong house was anonymously leaked to
the media and publicized in November 1999.
An attorney for M ena’s family hired Plaintiff Kearney, a former F.B.I.
agent, to investigate the killing. Kearney investigated and concluded that M ena
had been unarmed and that the SW AT team members had initially shot him solely
1
Because the district court granted Defendants’ motions to dismiss under
Fed. R. Civ. P. 12(b)(6), we recite the facts as alleged in the complaint and
assume for purposes of this appeal that they are true. See Elliott Indus. Ltd.
P’ship v. BP Am. Prod. Co., 407 F.3d 1091, 1123 (10th Cir. 2005).
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because they overreacted to the situation. Kearney further concluded that when
the SW AT team members realized that they had raided the wrong house and
nearly killed an unarmed man, they decided to cover up the truth: the SW AT team
shot M ena again, killing him, then altered the crime scene to look as if M ena had
been shooting at them. According to Kearney, the police department then
engaged in a two-month cover-up of the true nature of M ena’s death.
Kearney attempted to convince both a special prosecutor and the F.B.I. of
his conspiracy theory, but was essentially ignored. He therefore began to
publicize his allegations during appearances on a Denver radio talk show.
Defendants realized that Kearney posed a threat as a potential expert witness
against them and began to discuss how to silence him. Eventually, the Police
Protective Association of the City and County of Denver (“PPA”) and its
members conspired with attorney David Bruno and his law firm to intimidate
Kearney by filing a defamation lawsuit against Kearney, the talk show host, and
the radio station. The PPA funded the lawsuit, Bruno represented the defamation
plaintiffs, and many Defendants participated by giving false or misleading
deposition testimony. After the radio station and talk show host agreed to settle
the case, Defendants voluntarily dismissed the entire defamation law suit,
including all claims against Kearney — who had refused to settle. Kearney
nonetheless alleges that the lawsuit “injured him professionally, personally, and
economically, and his [sic] business and business reputation.”
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K earney thereafter filed the present suit against Defendants, alleging RICO,
RICO conspiracy, and state law claims. The district court granted D efendants’
motions to dismiss Kearney’s RICO claims under Rule 12(b)(6) because: (1) he
“failed to show that he has standing to pursue the RICO claims”; (2) his
“definition of the criminal enterprise is not different from his allegations of a
pattern of racketeering activity”; (3) he lacked “support for a valid claim of an
effect on interstate commerce”; and (4) “[t]he conspiracy claim is insufficient
because the . . . RICO violations . . . have not been adequately alleged.” Because
there were no remaining federal claims, the district court dismissed Kearney’s
state law claims under Rule 12(b)(1) for lack of jurisdiction.
During the litigation, Defendant PPA sought Rule 11 sanctions against
Kearney. The district court, however, declined to separate the federal claims
from the unresolved state law claims for sanctions purposes and therefore denied
the request. PPA appeals the denial of its motion for sanctions and Kearney
cross-appeals the dismissal of his RICO and RICO conspiracy claims.
II. D ISC USSIO N
A . D ismissal of Kearney’s RICO Claim s
As explained above, the district court dismissed Kearney’s RICO and RICO
conspiracy claims (together, “R ICO claims”) on numerous grounds. Because w e
agree that Kearney failed to plead an enterprise distinct from the pattern of
racketeering activity, we need not address the other grounds for dismissal.
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1. Standard of review
W e review de novo the district court’s grant of a motion to dismiss for
failure to state a claim. Sutton v. Utah State Sch. for the Deaf and Blind, 173
F.3d 1226, 1236 (10th Cir. 1999). In our review, we accept all well-pleaded
factual allegations as true and view them in the light most favorable to the
nonmoving party. Id. at 1236. “A 12(b)(6) motion should not be granted unless
it appears beyond doubt that the plaintiff can prove no set of facts in support of
his claim which w ould entitle him to relief.” Id. (quotation omitted).
2. Enterprise
Subsection 1962(c) of RICO makes it
unlawful for any person employed by or associated w ith any enterprise
engaged in, or the activities of which affect, interstate or foreign
commerce, to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern of racketeering
activity or collection of unlaw ful debt.
18 U.S.C. § 1962(c). Subsection 1962(d) makes it “unlaw ful for any person to
conspire to violate” subsection 1962(c). Id. § 1962(d). RICO provides a private
civil cause of action for those w ho are injured by violations of § 1962 and allow s
for recovery of treble damages, costs, and attorney fees. Id. § 1964(c).
“To successfully state a RICO claim, a plaintiff must allege four elements:
(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.”
Robbins v. W ilkie, 300 F.3d 1208, 1210 (10th Cir. 2002) (quotation omitted).
The second RICO element, an enterprise, “includes any individual, partnership,
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corporation, association, or other legal entity, and any union or group of
individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4).
Despite the apparent breadth of this definition, to properly plead an enterprise a
plaintiff must allege three components: (1) that there is “an ongoing organization
with a decision-making framew ork or mechanism for controlling the group,” (2)
“that various associates function as a continuing unit,” and (3) “that the enterprise
exists separate and apart from the pattern of racketeering activity.” United States
v. Smith, 413 F.3d 1253, 1266–67 (10th Cir. 2005) (quotations omitted).
W e conclude that Kearney has failed to allege the third component —
existence of an enterprise “separate and apart from the pattern of activity in which
it engages.” U nited States v. Turkette, 452 U.S. 576, 583 (1981). Kearney’s
amended complaint merely states, in relevant part:
This Complaint’s foundational claim s are abuse of legal process and
malicious prosecution of KEARNEY by the SW AT Team defendants
with the direct assistance and aid of the other defendants . . . .
At all relevant times, the defendants acted as a group of persons
associated together in fact for the common purpose of maliciously
prosecuting KEARNEY, and thereby abusing legal process, obstructing
justice, and conspiring to comm it and committing perjury. Therefore,
their conduct as such constitutes an association-in-fact “enterprise”
within the meaning of RICO . . . .
Compl. at 49–50.
It is clear from these assertions that the alleged enterprise and the alleged
pattern of racketeering activity are the same. Kearney claims that the Defendants
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associated in fact to obstruct justice by maliciously prosecuting him, but there is
no indication that the “association” had any existence or purpose outside of the
alleged malicious prosecution and intimidation of Kearney to prevent him from
continuing to expose the supposed illegal activity and cover-up pertaining to
M ena’s death. See United States v. Cianci, 378 F.3d 71, 82 (1st Cir. 2004)
(“[C]riminal actors who jointly engage in criminal conduct that amounts to a
pattern of ‘racketeering activity’ do not automatically thereby constitute an
association-in-fact RICO enterprise simply by virtue of having engaged in the
joint conduct. Something more must be found— something that distinguishes
RICO enterprises from ad hoc one-time criminal ventures.”); M ontesano v.
Seafirst Commercial Corp., 818 F.2d 423, 427 (5th Cir. 1987) (“[I]ndividuals who
join together for the commission of one discrete criminal offense have not created
an ‘association-in-fact’ enterprise, even if they commit two [or more] predicate
acts during the commission of this offense, because their relationship to one
another has no continuity.”). Simply put, Kearney’s allegations fail to show that,
in the absence of the alleged malicious prosecution and scheme of intimidation
against him, there would have been any association-in-fact at all among the
Defendants. See Handeen v. Lemaire, 112 F.3d 1339, 1352 (8th Cir. 1997) (“In
assessing whether an alleged enterprise has an ascertainable structure distinct
from that inherent in a pattern of racketeering, it is our normal practice to
determine if the enterprise would still exist were the predicate acts removed from
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the equation.”). Therefore, Kearney has failed to properly plead an enterprise, 2
and his RICO claims were properly dismissed. 3
B. Rule 11 Sanctions
W e now turn to the second issue in this case: whether the district court
properly denied Defendant PPA’s motion for sanctions against K earney. W e
conclude that the denial was improper and remand for further consideration.
1. Standard of review
“All aspects of the district court’s Rule 11 determination are reviewed for
abuse of discretion, which is shown if the district court based its ruling on an
2
In his response to Defendants’ motions to dismiss, Kearney claimed that
“the Denver Police Department and those closely affiliated with it is the
enterprise.” On appeal, he asserts that there were four enterprises: the Bruno law
firm, the PPA, the Denver Police Department, and the association-in-fact of all
Defendants. W e decline to consider these claims because they were not pleaded
in the complaint. “It is well-established . . . that in determining whether to grant
a motion to dismiss, the district court, and consequently this court, are limited to
assessing the legal sufficiency of the allegations contained within the four corners
of the complaint.” Jojola v. Chavez, 55 F.3d 488, 494 (10th Cir. 1995); see also
Car Carriers, Inc. v. Ford M otor Co., 745 F.2d 1101, 1107 (7th Cir. 1984) (“[I]t is
axiomatic that the complaint may not be amended by the briefs in opposition to a
motion to dismiss.”).
3
Because dismissal of Kearney’s § 1962(c) claim was proper, dismissal of
his RICO conspiracy claim was therefore also proper. See Tal v. Hogan, 453 F.3d
1244 at 1270 (10th Cir. 2006) (“By its terms, § 1962(d) requires that a plaintiff
must first allege an independent violation of subsections (a), (b), or (c), in order
to plead a conspiracy claim under subsection (d).”); Condict v. Condict, 826 F.2d
923, 927 (10th Cir. 1987) (“[A]ny claim under § 1962(d) based on a conspiracy to
violate the provisions of 18 U.S.C. § 1962(a), (b), or (c) must necessarily fall if
the substantive claims are themselves deficient.”).
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erroneous view of the law or on a clearly erroneous assessment of the evidence.”
Barrett v. Tallon, 30 F.3d 1296, 1301 (10th Cir. 1994) (quotation omitted).
2. Analysis
The district court denied PPA’s motion for sanctions against Kearney,
concluding that
[t]he insufficiency of the federal claims does not warrant a determination that
sanctions should be imposed. That would require a separation of the federal
claims from the state claims and this court has no basis for determining that
none of the state claims made against PPA could be supported by evidence if
those claims w ere fully litigated. This court has no basis for making a Rule
11 determination with respect to the state law claims and is unwilling to
separate them for this purpose.
W e agree with the PPA that the district court made “the erroneous legal
assumption that the sanction analysis for the dismissed federal claims . . . was
somehow dependent on either the validity or the adjudication of the state law
claims.”
Subdivision (b) of Rule 11 provides, in relevant part, that
[b]y presenting to the court (whether by signing, filing, submitting, or later
advocating) a pleading, written motion, or other paper, an attorney . . . is
certifying that to the best of the person’s knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances,--
...
(2) the claims, defenses, and other legal contentions therein are
warranted by existing law or by a nonfrivolous argument for the
extension, modification, or reversal of existing law or the establishment
of new law; [and]
(3) the allegations and other factual contentions have evidentiary
support or, if specifically so identified, are likely to have evidentiary
support after a reasonable opportunity for further investigation or
discovery; . . . .
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Fed. R. Civ. P. 11(b). Rule 11 further provides that “[i]f, after notice and a
reasonable opportunity to respond, the court determines that subdivision (b) has
been violated, the court may . . . impose an appropriate sanction upon the
attorneys, law firms, or parties that have violated subdivision (b) or are
responsible for the violation.” Id. at 11(c).
In Dodd Insurance Services, Inc. v. Royal Insurance Company of America,
935 F.2d 1152 (10th Cir. 1991), we noted a circuit split as to the proper
interpretation of Rule 11:
Some courts have interpreted Rule 11 narrowly, suggesting that
sanctions are inappropriate when a pleading contains both valid and
frivolous claims. See, e.g., FDIC v. Tekfen Constr. & Installation Co.,
847 F.2d 440, 444 n.6 (7th Cir. 1988) (“[E]ven if this minor argument
were off the mark, the fact that one argument in an otherwise valid
paper is not meritorious” does not warrant Rule 11 sanctions.); Burull
v. First Nat’l Bank of M inneapolis, 831 F.2d 788, 789 (8th Cir. 1987)
(lawsuit containing meritless and factually groundless claims did not
mandate Rule 11 sanctions because complaint, “taken as a whole, was
legally and factually substantial enough to reach a jury”), cert. denied,
485 U.S. 961 (1988); Golden Eagle Distrib. Corp. v. Burroughs Corp.,
801 F.2d 1531, 1540 (9th Cir. 1986) ( “Rule [11] permits the imposition
of sanctions only when the ‘pleading, motion, or other paper’ itself is
frivolous, not when one of the arguments in support of a pleading or
motion is frivolous.”). O ther courts interpret Rule 11 more broadly,
finding that it may be violated by a pleading containing a single
frivolous claim. See, e.g., Cross & Cross Properties v. Everett Allied
Co., 886 F.2d 497, 504 (2d Cir. 1989) (“[T]o adopt a standard that
would deny sanctions for a significant and obviously meritless claim
simply because the rest of the pleading was sound strikes us as contrary
to this court’s established reading of Rule 11.”); Patterson v. Aiken, 841
F.2d 386, 387 (11th Cir. 1988) (“Rule 11 does not prevent the
imposition of sanctions where it is shown that the Rule was violated as
to a portion of a pleading, even though it was not violated as to other
portions.”); Frantz v. United States Pow erlifting Fed’n, 836 F.2d 1063,
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1067 (7th Cir. 1987) (“R ule 11 applies to all statements in papers it
covers. Each claim m ust have sufficient support; each must be
investigated and researched before filing.”).
Id. at 1158. W e chose in Dodd to follow the broader interpretation of Rule 11
and therefore held “that a pleading containing both frivolous and nonfrivolous
claims may violate Rule 11.” Id. W e firmly stated that “[t]o conclude otherwise
would allow a party with one or more patently meritorious claims to pepper his
complaint with one or more highly advantageous, yet wholly frivolous, claims, for
that party would be assured that the weight of his meritorious claim(s) would
shield him from sanctions.” Id. (quotation omitted).
W e conclude that Dodd is controlling in this case. The district court
essentially declined to consider whether the insufficiency of Kearney’s RICO
claims merited sanctions because it was unwilling to “separat[e]” those claims
from Kearney’s other — potentially meritorious — state-law claims. Yet Dodd
specifically held that proper application of Rule 11 requires evaluating claims
individually for sanctions purposes. This comports with the plain language of the
Rule, which speaks in terms of “claims” and “legal contentions.” Fed. R. Civ. P.
11(b)(2). Each claim must be individually evaluated and the merit, or potential
merit, of one legal claim does not diminish the command of Rule 11 that each
claim have the necessary legal support.
Kearney argues that the district court’s refusal to separate the claims was
proper because his state-law claims were “at the heart” of his RICO claims. W e
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do not think that relatedness matters. Although there are, not surprisingly, many
similarities between the state and federal causes of action asserted by Kearney,
RIC O contains special requirements that do not apply to the state law claims.
Therefore, even if Kearney were to prevail on his state-law claims, that would be
quite irrelevant to the question of whether the federal claims — with their unique
requirements — were warranted and nonfrivolous.
W e emphasize that our decision, of course, should not be taken as a
conclusion that sanctions are merited in this case; that is a decision for the district
court to make in the first instance. Our conclusion is simply that the district court
“based its ruling on an erroneous view of the law,” Barrett, 30 F.3d at 1301
(quotation omitted), and thereby abused its discretion. Consequently, we remand
for the district court to address whether sanctions are merited.
III. C ON CLU SIO N
For the foregoing reasons, we AFFIRM the dismissal of Kearney’s RICO
claims but REVERSE the district court’s decision on sanctions and REM AND for
a determination of whether sanctions are merited.
ENTERED FOR THE COURT
David M . Ebel
Circuit Judge
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