[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
______________________ ELEVENTH CIRCUIT
December 02, 2004
No. 03-14366 THOMAS K. KAHN
______________________ CLERK
D.C. Docket No. 01-01201-CV-F-S
PAUL M. KIRWIN, CELL-CAL T9, JOSEPH W. CARCIONE, RICHARD
ERICKSON, GEORGE R. GORDON, STEVEN GREWAL, LINDA M. HOFF
PARTNERSHIP, STEVEN C. MEYER, RAJIVE OBEROI, JONATHAN
STEWART, KENNETH L. RAMSEY, HAROLD W. SWART,
Plaintiffs-Appellants,
versus
PRICE COMMUNICATIONS CORPORATION, PRICE COMMUNICATIONS
CELLULAR, INC., PRICE COMMUNICATIONS CELLULAR HOLDINGS,
INC., PRICE COMMUNICATIONS WIRELESS, INC., PRICE WIRELESS
HOLDINGS, INC., CELLULAR SYSTEMS OF SOUTHEAST ALABAMA,
INC., ROBERT PRICE,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Middle District of Alabama
________________________
(December 2, 2004)
Before DUBINA and CARNES, Circuit Judges, and MILLS*, District Judge.
RICHARD MILLS, District Judge:
An issue of first impression in this Circuit:
Does the “intracorporate conspiracy doctrine” bar a civil conspiracy claim
under 18 U.S.C. 1962(d)?
The short answer: no.
I. PROCEDURAL HISTORY
Appellant Paul Kirwin and eleven other former minority shareholders of
Cellular Systems of Southeast Alabama, Inc.1 (“Cellular Systems”), sued:
(1) Cellular Systems;
(2) Palmer Wireless Holdings, Inc. (“Palmer Wireless”), the former
majority shareholder of Cellular Systems;
(3) Price Communications Wireless, Inc. (“Price Wireless”);
(4) Price Communications Cellular Holdings, Inc. (“Price Holdings”);
(5) Price Communications Cellular, Inc. (“Price Cellular”);
*
Honorable Richard Mills, United States District Judge of the Central District of Illinois,
sitting by designation.
1
The eleven other plaintiffs are Cell-Cal T9 (a partnership), Joseph W. Carcione,
Richard Erickson, George R. Gordon, M. Steven Grewal, Linda M. Hoff Partnership (a
partnership), Steven C. Meyer, Rajive Oberoi, Jonathan Stewart, Kenneth L. Ramsey, and Harold
W. Swart.
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(6) Price Communications Corporation (“PCC”); and
(7) Robert Price (“Price”).
The Appellants (collectively referred to as “Kirwin”) alleged several state
law actions against the Appellees (collectively referred to as “Cellular Systems”).
Kirwin also alleged federal securities law violations, a RICO claim,
misappropriation of assets, self-dealing, and fraud related to a short-form merger
that eliminated his minority interest in Cellular Systems2.
The district court found Kirwin’s complaint to be defective because he did
not relate allegations of fraud to particular transactions. Thus, the district court
ordered Kirwin to file an amended complaint on or before June 14, 2002, or risk
dismissal. Kirwin timely filed an amended complaint. Cellular Systems moved
for dismissal under Federal Rule of Civil Procedure 12(b)(6), arguing that Kirwin
failed to state a claim and that he failed to satisfy Federal Rule of Civil Procedure
9(b)’s heightened pleading standard for fraud claims. The district court agreed
with Cellular Systems, dismissing Kirwin’s federal claims and declining to
exercise supplemental jurisdiction over his state law claims.
II. FACTUAL BACKGROUND
2
Kirwin based his federal claims on §§ 10(b) and 20(a) of the Securities Exchange Act
of 1934 (15 U.S.C. §§ 78j(b), 78t(a)) and SEC Rule 10b-5 (17 C.F.R. § 240.10b-5); Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1962, 1964.
3
The district court determined the facts as follows: Palmer Wireless is a
Delaware corporation that acquired a majority interest in Cellular Systems (also a
Delaware corporation) by transfer from a parent company in 1995. In 1997, PCC
and Price (who was CEO and treasurer of PCC) decided to acquire Palmer
Wireless, which already owned 92.3% of Cellular Systems’ shares. With this in
mind, PCC formed Price Cellular, Price Holdings, and Price Wireless, all
Delaware corporations with Price as chief executive officer (CEO). Price Wireless
was a wholly-owned subsidiary of Price Holdings, which was a wholly-owned
subsidiary of Price Cellular, which was a wholly-owned subsidiary of PCC.
Price Wireless acquired Palmer Wireless in a leveraged buy-out (LBO). To
finance the acquisition, PCC sold approximately $191 million in assets and
borrowed approximately $857 million, securing the debt with the target company’s
assets, including Cellular Systems’ assets and the assets of Dothan Cellular, a
wholly-owned subsidiary of Cellular Systems. Price became CEO of Cellular
Systems and Dothan Cellular, and over the next several years Cellular Systems
made low-interest loans to its parent companies.
From 1997-2001 (the “control period”), Cellular Systems held no
shareholders’ meetings and did not contact the minority shareholders to tell them
about the low-interest loans or the liens that had been placed in connection with
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the LBO. Furthermore, Cellular Systems did not contact the minority shareholders
to tell them the purpose of the management fees paid during the control period or
the basis for allocating various cost and revenue items on Cellular Systems’ books.
At some point, one or more of the defendant companies offered to buy back
stock from minority shareholders “in the Price Markets.” In 2000, PCC, Price
Cellular, Price Holdings, and Price Wireless entered into an agreement with
Verizon Wireless, Inc. for the sale of Price Wireless. As part of this agreement,
these defendants agreed to “use commercially reasonable efforts” to acquire any
minority holdings in Price Wireless’ subsidiaries, including minority shareholders
in the Company.
In 2001, Palmer Wireless (still under the complete control of Price
Wireless), which owned approximately 94.5% of Cellular Systems’ shares,
absorbed Cellular Systems in a short-form merger under Del.Code Ann. Title 8, §
253.
Afterwards, Palmer Wireless sent an eleven-page Information Statement,
signed by Price as chairman of Palmer Wireless, to the minority shareholders of
Cellular Systems. The Information Statement said that minority shareholders
could take $7,342.30 per share or demand appraisal rights in the Delaware Court
of Chancery. Furthermore, it gave the terms of the merger; explained how Palmer
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Wireless had arrived at the $7,342.30 figure by comparable acquisition valuation
methodology; briefly discussed the tax consequences of the merger; described the
mechanics of the merger; and explained how a shareholder could exercise his
appraisal rights under Delaware law. The Information Statement also described
the upcoming acquisition of Price Wireless by Verizon, stating that Cellular
Systems’ shareholders were not entitled to any consideration under the terms of
that acquisition and telling them how to get more information on it from the
Securities Exchange Commission.
III. STANDARD OF REVIEW
The Court reviews de novo a district court’s order granting a defendant’s
Rule 12(b)(6) motion to dismiss. See Chepstow Ltd. v. Hunt, 381 F.3d 1077, 1080
(11th Cir. 2004) (citation omitted). In doing so, the Court accepts as true the
factual allegations in a plaintiff’s complaint and construes the facts in the light
most favorable to a plaintiff as the non-moving party. Id. (citation omitted). A
motion to dismiss may be granted only when a defendant demonstrates “beyond
doubt that the plaintiff can prove no set of facts in support of his claim which
would entitle him to relief.” Id. ,citing Harper v. Blockbuster Entm’t Corp., 139
F.3d 1385, 1387 (11th Cir.1998) (internal quotation and citation omitted)).
IV. ANALYSIS
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“The intracorporate conspiracy doctrine holds that acts of corporate agents
are attributed to the corporation itself, thereby negating the multiplicity of actors
necessary for the formation of a conspiracy. Simply put, the doctrine states that
under the doctrine, a corporation cannot conspire with its employees, and its
employees, when acting in the scope of their employment, cannot conspire among
themselves.” See McAndrew v. Lockheed Martin Corp., 206 F.3d 1031, 1035
(11th Cir.2000) (en banc).
This Circuit has never decided whether the intracorporate conspiracy
doctrine bars § 1962(d) claims3. The four circuits that have addressed the issue are
3
The full of § 1962, including subsection (d), is as follows:
(a) It shall be unlawful for any person who has received any income derived,
directly or indirectly, from a pattern of racketeering activity or through collection
of an unlawful debt in which such person has participated as a principal within the
meaning of section 2, title 18, United States Code, to use or invest, directly or
indirectly, any part of such income, or the proceeds of such income, in acquisition
of any interest in, or the establishment or operation of, any enterprise which is
engaged in, or the activities of which affect, interstate or foreign commerce. A
purchase of securities on the open market for purposes of investment, and without
the intention of controlling or participating in the control of the issuer, or of
assisting another to do so, shall not be unlawful under this subsection if the
securities of the issuer held by the purchaser, the members of his immediate
family, and his or their accomplices in any pattern or racketeering activity or the
collection of an unlawful debt after such purchase do not amount in the aggregate
to one percent of the outstanding securities of any one class, and do not confer,
either in law or in fact, the power to elect one or more directors of the issuer.
(b) It shall be unlawful for any person through a pattern of racketeering activity or
through collection of an unlawful debt to acquire or maintain, directly or
indirectly, any interest in or control of any enterprise which is engaged in, or the
activities of which affect, interstate or foreign commerce.
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split on the answer. The Seventh and the Ninth Circuits have held that the
intracorporate conspiracy doctrine does not bar § 1962(d) claims. See Ashland
Oil, Inc. v. Arnett, 875 F.2d 1271 (7th Cir. 1989); Webster v. Omnitrition
International, Inc., 79 F.3d 776, 787 (9th Cir. 1996). The Fourth and Eighth
Circuits have reached the opposite conclusion. See Detrick v. Panalapina, Inc.,
108 F.3d 529, 544 (4th Cir. 1997); Fogie v. THORN Americas, Inc., 190 F.3d 889
(8th Cir. 1999).
Although other circuits offer guidance on this issue, our own McAndrew
decision is our primary guidepost for deciding whether § 1962(d) claims are
barred by the intracorporate conspiracy doctrine. In McAndrew, the plaintiff
brought a civil conspiracy claim under 42 U.S.C. § 1985(2) based on facts that
also constituted a criminal conspiracy under 18 U.S.C. §§ 371 and 1512. Id. at
1034. The defendants asserted that the intracorporate conspiracy doctrine shielded
them from liability. However, the Court held that “just as the intracorporate
(c) It shall be unlawful for any person employed by or associated with 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
unlawful debt.
(d) It shall be unlawful for any person to conspire to violate any of the provisions
of subsection (a), (b), or (c) of this section.
See 18 U.S.C. § 1962.
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conspiracy doctrine cannot shield a criminal conspiracy from prosecution under
the federal criminal code, the doctrine cannot shield the same conspiracy, alleging
the same criminal wrongdoing, from civil liability arising under 42 U.S.C. §
1985(2). Id.
Although Kirwin based his civil conspiracy claim on § 1962(d) rather than §
1985, the principle expressed in McAndrew is wholly applicable here. That is to
say, the intracorporate conspiracy doctrine cannot be invoked to defeat a § 1962(d)
claim. Corporations and their agents are distinct entities and, thus, agents may be
held liable for their own conspiratorial actions. See Cedric Kushner Promotions,
Ltd. v. King, 533 U.S. 158, 163, 121 S.Ct. 2087, 2091, 150 L.Ed.2d 198 (2001)
(“The corporate owner/employee, a natural person, is distinct from the corporation
itself, a legally different entity with different rights and responsibilities due to its
different legal status.”).
Accordingly, we join the Seventh and Ninth Circuits in holding that the
intracorporate conspiracy doctrine does not bar § 1962(d) claims.
III. CONCLUSION
Therefore, we REVERSE the district court’s decision with respect to the
intracorporate conspiracy doctrine. In all other regards, the district court’s
decision is AFFIRMED.
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