United States Court of Appeals
Fifth Circuit
F I L E D
December 19, 2003
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
__________________________
No. 02-41377
__________________________
RICHARD R. RICHARD, JR., on behalf of himself and all others
similarly situated,
Plaintiff - Appellant,
versus
HOECHST CELANESE CHEMICAL GROUP, INC., Hoechst
Celanese Chemical Group; SHELL OIL COMPANY, doing business as
Shell Chemical Company; HOECHST CELANESE CORPORATION,
Hoechst Celanese Corporation; E. I. DUPONT DE NEMOURS AND
COMPANY,
Defendants - Appellees.
___________________________________________________
Appeal from the United States District Court
For the Eastern District of Texas
___________________________________________________
Before WIENER, CLEMENT, and PRADO, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
This case arises from a class action lawsuit brought by Richard R. Richard (“Richard”), on
behalf of himself and a putative class consisting of parties who allegedly suffered damages from
inherently defective polybutylene (“PB”) plumbing systems installed in their homes. Richard alleges
that Hoechst Celanese Chemical Group, Hoechst Celanese Corporation (collectively “Hoechst”), Shell
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Oil Company (“Shell”), and E.I. DuPont Nemours (“DuPont”) caused the put ative class’s injuries
through their manufacture, promotion, and sale of PB for use in residential and commercial plumbing
systems. Richard appeals the district court’s dismissal of his class action lawsuit for lack of subject
matter jurisdiction with regard to his 42 U.S.C. § 1983 due process claim, and dismissal for failure to
state a claim upon which relief can be granted with regard to his RICO claims.
I. FACTS AND PROCEEDINGS
Richard owns and lives in a mobile home with a PB plumbing system. Over time, the leaks
from the PB plumbing system have caused substantial damage to Richard’s mobile home. Richard
contends that the PB plumbing system is inherently defective.
PB is a by-product of oil refining. Shell, the exclusive seller of PB resin in the late 1970's,
developed flexible PB pipes, which other companies like DuPont and Hoechst manufactured. DuPont
and Hoechst also used PB resin to develop raw materials for joint fittings in PB plumbing systems.
A. Richard’s Allegations
Richard alleges that Shell, DuPont, and Hoechst (collectively the “Appellees”) administered
a complex scheme to mislead buyers into believing that PB plumbing systems were suitable for use as
potable water distribution systems. To this end, t he Appellees allegedly claimed that PB plumbing
systems were superior to copper plumbing systems based on their representations that PB systems
were lightweight, inexpensive, better able to withstand freezing temperatures, easier to install and
purportedly enjoyed a lifetime of 50 years. According to Richard, the Appellees knew that these
representations were untrue because their scientists allegedly reported that the PB plumbing systems
would degrade even when exposed to low concentrations of chlorine typically found in municipal
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water systems. Richard claims that in spite of this knowledge, the Appellees concealed the information
and continued to market these products until approximately 1996.
Richard further claims that before purchasing his mobile home in 1997, he inquired about its
plumbing system. The seller informed him that the mobile home was equipped with an exceptionally
reliable PB plumbing system that would likely outlast the mobile home itself. According to Richard,
the seller unwittingly made this misrepresentation in reliance on the promotional materials that the
Appellees promulgated. Taking these misrepresentations into consideration, Richard purchased the
home.
B. The Cox and Spencer Class Action Settlements
The defective PB plumbing systems caused considerable litigation. In 1994, a group of
plaintiffs reached a class action settlement in a Texas state court with the Appellees, but the Texas
court rejected the settlement. Beeman v. Shell Oil Co., No. 93-047363 (Dist. Ct., Harris County,
Tex.). In the meantime, other plaintiffs filed separate PB class actions in Alabama state court and
Tennessee state court. Spencer v. Shell Oil Co., No. CV94-074 (Cir. Ct., Greene County, Ala.); Cox
v. Shell Oil Co., No. 18,844, 1995 WL 775363 (Chanc. Ct., Obi on County, Tenn.). In 1995, the
Appellees entered into a class action settlement in Cox. The Tennessee state court approved a national
settlement, which required Shell and Hoechst to contribute $950 million to replace eligible consumers’
leaking PB plumbing systems and to reimburse them for the property damage which the leaks had
caused. In Spencer, the Alabama state court approved a class action settlement that required DuPont
to contribute further sums toward the repair and replacement of PB plumbing systems.
C. Proceedings in the Present Action
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Richard filed his Original Class Action Complaint in the Eastern District of Texas on January
10, 2000, on behalf of himself and a class of similarly situated persons pursuant to Federal Rule of
Civil Procedure Rule 23. In his Second Amended Complaint, he defined the Class as follows:
All Texas citizens, residents and entities authorised [sic] to do
business in Texas that own plumbing systems in structures in Texas
and elsewhere, in which there is polybutylene plumbing and over
which Tennessee and Alabama courts lacked subject matter
jurisdiction.
All U.S. citizens and entities that were excluded from the
settlement classes of Cox v. Shell Oil Co., No. 18,844 (Tenn. Chanc.
Ct., Obion City) and Spencer v. Shell Oil Co., No. CV94-074 (Greene
Cty., Ala.) because defects in their polybutylene plumbing systems
were defined as non-qualifying.
All U.S. citizens and entities that own structures containing
polybutylene plumbing systems and have never participated in a
polybutylene class action in a court of competent personal and subject
matter jurisdiction.
Richard claimed that the Appellees were liable for the damages t hat he and the class members
sustained as a result of the leaks in their PB plumbing systems. The complaint cited theories of
conspiracy, strict liability, negligence, and breach of implied warranties. Richard also asserted that the
Appellees violated his due process rights, giving rise to a cause of action under 42 U.S.C. § 1983. He
based this assertion on his allegation that the Appellees and class counsel in Cox colluded in setting
up procedural safeguards for class member certification. Richard also alleged that as an absent class
member of the Cox and Spencer suits, he did not receive adequate notice, had no opportunity to opt-
out, and did not receive adequate representation. Finally, Richard amended his complaint to include
claims under 18 U.S.C. § 1962(a) of the RICO Act.
On May 25, 2001, Richard and DuPont reached an agreement and jointly moved for
preliminary class certification as to DuPont only, and for preliminary approval of a settlement
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agreement. Shell and Hoechst opposed the motion. On March 30, 2002, the district court issued its
memorandum and opinion, holding that: (1) the court did not have jurisdiction over Richard’s § 1983
claim because of the Rooker-Feldman doctrine; (2) the court had subject matter jurisdiction over the
federal RICO claims, but those claims failed to state a claim upon which the court could grant relief
under Federal Rule of Civil Procedure 12(b)(6); and (3) Richard did not satisfy requirements for class
certification.
Richard timely appeals the district court’s dismissal of his claims for lack of subject matter
jurisdiction and failure to state a claim under Rule 12(b)(6).
II. STANDARD OF REVIEW
We review de novo a district court’s dismissal of a claim for lack of subject matter jurisdiction.
Atlas Global Group, L.P. v. Grupo Dataflux, 312 F.3d 168, 170 (5th Cir. 2002). We also review de
novo a district court’s dismissal of a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).
Herrmann Holdings, Ltd. v. Lucent Techs., Inc., 302 F.3d 552, 557 (5th Cir. 2002).
III. DISCUSSION
Richard raises two issues on appeal. First, Richard argues that the district court erred in
finding that the Rooker-Feldman doctrine bars consideration of his 42 U.S.C. § 1983 due process
claim. He claims that because Rooker-Feldman is consistent with principles of full faith and credit,
this Court cannot apply Rooker-Feldman to bar a claim challenging a judgment allegedly reached
without constitutionally sufficient procedural safeguards. Second, he contends that the district court
erred in dismissing his RICO claim because it erroneously construed 18 U.S.C. § 1964 to preclude
equitable remedies for private plaintiffs. We address these arguments in turn.
A. Richard’s § 1983 Claim
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In Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923), and District of Columbia Court of
Appeals v. Feldman, 460 U.S. 462 (1983), the Supreme Court held that state courts must resolve
constitutional questions that arise during their proceedings. If the state trial court errs in deciding the
constitutional issues, the judgment is not void, but the appropriate state appellate court must correct
it. Rooker, 263 U.S. at 416. Any subsequent recourse to federal court is limited to an application for
a writ of certiorari to the United States Supreme Court. Id. Consequently, lower federal courts lack
jurisdiction to review state court judgments when the constitutional claims are “inextricably
intertwined” with the challenged state court judgment. Feldman, 460 U.S. at 483 n.16.
Our sister circuits have applied the Rooker-Feldman doctrine to hold that a federal court does
not have jurisdiction over a class action suit that a state court has already adjudicated, even where an
absent class member alleges procedural due process violations. Kamilewicz v. Bank of Boston Corp.,
92 F.3d 506, 510-11 (7th Cir. 1996); Snider v. City of Excelsior Springs, Mo., 154 F.3d 809, 812 (8th
Cir. 1998). In Kamilewicz, the plaintiffs argued that Rooker-Feldman should not apply to an Alabama
state court judgment because the Alabama court did not comply with the procedural safeguards
necessary for exercising personal jurisdiction over absent class members. Kamilewicz, 92 F.3d at 509.
Despite alleging these deficiencies, the plaintiffs also claimed that they did not seek to overturn the
Alabama judgment. Id. The Seventh Circuit found these positions to be in conflict, and reasoned that
the plaintiffs merely sought to set aside a state court judgment. Id. at 510. Because the plaintiffs did
not present an independent claim, the court applied Rooker-Feldman. Id.
In Snider, absent class members of a state court class action suit alleged that they never
received proper notice, and that as a result, they were never parties to the litigation. 154 F.3d at 812.
Because they did not receive notice, the absent class members argued that Rooker-Feldman should
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not apply. Id. The court, however, did not agree. Id. According to the Eighth Circuit, if the federal
court found that the absent class members were not parties, then the federal court would have to find
that the state court wrongly certified the class and wrongly ordered a final judgment. Id. Such a
holding would create a procedural due process exception to the Rooker-Feldman doctrine, but no such
exception exists. Id.; accord Liedtke v. State Bar of Texas, 18 F.3d 315, 317 (5th Cir. 1994) (refusing
to find a due process exception to Rooker-Feldman).
While we find this reasoning persuasive, we also recognize that the Rooker-Feldman doctrine
only applies insofar as a state court judgment merits full faith and credit. Matsushita Elec. Indus. Co.,
Ltd. v. Epstein, 516 U.S. 367, 373 (1996) (stating that a federal court must give preclusive effect to
a state court judgment only to the extent that the law of the state would give preclusive effect to the
judgment); In re Lease Oil Antitrust Litigation, 200 F.3d 317, 319 n.1, 320 (5th Cir. 2000) (noting
that the Rooker-Feldman doctrine is consistent with the Full Faith and Credit Act, 28 U.S.C. § 1783);
Gauthier v. Continental Diving Services, 831 F.2d 559, 561 (5th Cir. 1987) (declining to apply the
Rooker-Feldman doctrine because doing so would require the federal court to give greater deference
to a state court judgment than that state’s courts would give the judgment); Kamilewicz v. Bank of
Boston Corp., 100 F.3d 1348 (7th Cir. 1996) (Easterbrook, J., dissenting on request for rehearing en
banc). Federal jurisdiction is therefore proper under Rooker-Feldman if the state law does not provide
preclusive effect to the state court judgment.
In a class action lawsuit, a court may exercise jurisdiction over absent class members only if
the court follows certain due process procedures. Phillips Petroleum Co. v. Shutts, 472 U.S. 797,
811-12 (1985). A co urt must ensure that class members have received adequate notice,
representation, and an opportunity to opt-out. Id. at 812. The settlement judgment has no preclusive
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effect if the court does not comply with these procedures. Id. at 805. Thus, to merit full faith and
credit, a state must adhere to the due process guidelines of Shutts.
In light of Shutts, it would seem that Rooker-Feldman does not apply where a state court has
not followed the due process requirements for class certification. In the instant case, Richard attempts
to escape the reach of Rooker-Feldman by alleging such procedural infirmities. He argues that as a
result of the due process deficiencies, the Cox state court did not properly exercise jurisdiction over
him.
Given the class action nature of this case, it is necessary to resolve the following tension in
applying Rooker-Feldman. On the one hand, federal courts can examine jurisdictional matters brought
before them. If the absent class members were not subject to the state court’s jurisdiction or bound
by its judgment, then federal courts would have jurisdiction over the absent class members’ federal
claims. Richard’s jurisdictional allegations would thus seem to require a federal court to review
whether federal jurisdiction exists, which would necessitate reviewing the disputed findings in Cox.
On the other hand, Rooker-Feldman prohibits federal review of substantive state court
findings. Rooker, 263 U.S. at 416. In class action suits, the findings related to procedural due process
determine class size, which ultimately affects the final judgment. The findings directly affect the
substantive outcome, so challenging them would seem to conflict with the Rooker-Feldman doctrine.
Here, Richard’s allegations indisputably denounce the express findings of the Cox state court. Because
his challenge would result in setting aside a state court judgment, Rooker-Feldman seems to bar
federal review of these findings.
Reconciling these seemingly conflicting positions requires further analysis of Rooker-Feldman.
As noted previously, the Supreme Court held in Feldman that “[i]f the constitutional claims presented
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to a United States District Court are inextricably intertwined” with the state court’s judgment, then
the federal district court has no jurisdiction. 460 U.S. at 483 n.16. This Court has determined that
issues are “inextricably intertwined” when a plaintiff cast s a complaint in the form of a civil rights
action simply to circumvent the Rooker-Feldman rule. Liedtke, 18 F.3d at 317.
The Feldman holding appears to squarely fit Richard’s situation. The Cox court’s findings that
allow for certification are “inextricably intertwined” with Richard’s constitutional challenge to the
state’s compliance with due process requirements. A federal court cannot examine the due process
deficiencies in Cox without disturbing the underlying judgment.
Moreover, the Liedtke holding is also applicable here. In order to comply with Liedtke, a
plaintiff cannot assert a § 1983 claim to circumvent the Rooker-Feldman doctrine. 18 F.3d at 317.
However, as discussed below, Richard’s § 1983 claim is clearly untenable. His blatant nonconformity
with the requirements of § 1983 thus suggests that he has merely cast his complaint in the form of a
civil rights action in an attempt to circumvent Rooker-Feldman. Given that his underlying § 1983
argument fails, the class action procedural issues that Richard raises are irrelevant. Because Richard’s
§ 1983 claim merely serves as an instrument for evading Rooker-Feldman, that doctrine bars his claim.
To state a claim under § 1983, a plaintiff must allege facts tending to show that the defendant
has acted “under color of state law.” American Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40 (1999);
Lugar v. Edmondson Oil Co., 457 U.S. 922 (1982); Blum v. Yaretsky, 457 U.S. 991 (1982); Flagg
Bros. v. Brooks, 436 U.S. 149 (1978). “[T]he under-color-of-state-law element of § 1983 excludes
from its reach merely private conduct, no matter how discriminatory or wrongful.” Sullivan, 526 U.S.
at 50. (internal quotations omitted). A plaintiff must show that the party charged with depriving the
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plaintiff of her federal right is an entity that can be fairly described as a state actor. Lugar, 457 U.S.
at 937.
This Court has previously outlined the various tests that the Supreme Court employs to
determine whether a private party has acted under color of state law. Bass v. Parkwood, 180 F.3d
234, 241-43 (5th Cir. 1999) (applying the tests to hold that a private mental institution did not act
under color of state law by committing the plaintiff). According to the public function test, a private
entity acts under color of state law when the entity performs a function which is “exclusively reserved
to the state.” Flagg Bros., 436 U.S. at 157-58. (internal quotations omitted); Wong v. Stripling, 881
F.2d 200, 202 (5th Cir. 1989). The state compulsion (or coercion) test holds the state responsible “for
a private decision only when [the state] has exercised coercive power or has provided such significant
encouragement, either overt or covert, that the choice must in law be deemed to be that of the State.”
Blum v. Yaretsky, 457 U.S. 991, 1004 (1982) (internal quotations omitted). Similarly, the nexus or
state action test finds state act ion where the state has “so far insinuated itself into a position of
interdependence with the [private actor] that it was a joint participant in the enterprise.” Jackson v.
Metropolitan Edison Co., 419 U.S. 345, 357-58 (1974); see also Lugar, 457 U.S. at 941-42 (1982).
Richard argues that Appellees acted under color of state law based on the state action test.
He relies on Lugar, in which the Supreme Court found “joint participation” between a private actor
and the state. 457 U.S. at 942. In Lugar, a creditor allegedly failed to meet the statutory requirements
for enforcing attachment of the debt or’s property, yet state officials seized the property without
allowing the debtor to defend the action. Id. at 925. The Court found joint participation because the
state officials committed an ex parte action at the request of a private party. Id. at 942. In reaching
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this conclusion, the Court stated that to find state action under § 1983, the plaintiff must satisfy two
criteria. Id. at 937. First, the deprivation at issue must “be caused by the exercise of some right or
privilege created by the [s]tate or by a rule of conduct imposed by the state or by a person for whom
the [s]tate is responsible.” Id. Second, the private “party charged with the deprivation must be a
person who may fairly be said to be a state actor.” Id.
Although Richard’s allegations are sufficient to satisfy the first prong of this test, the
allegations fall well short of satisfying the second prong. Richard cannot show that the Appellees can
“fairly be said to be . . . state actor[s].” Lugar, 457 U.S. at 942. Richard attempts to reach this
conclusion by reasoning that a private party is a state actor if the party either (1) complies with a
wrong judgment, or (2) commits wrongful acts that influence a judgment. Both arguments fail. With
respect to the first argument, this Court’s precedent establishes that even if a court wrongly decides
a case, the fact that a private party complies with that wrong decision does not constitute state action.
Landry v. A-Able Bonding, Inc., 75 F.3d 200 (5th Cir. 1996). In Landry, the plaintiff brought a §
1983 suit for false imprisonment against a bail bondsman. Id. Although the bondsman possessed a
state-issued warrant, this Court found that he had not acted under color of state law because he did
not communicate that he was acting under state authority during the seizure. Id. at 204-05.
Complying with the state order did not subject him to suit under § 1983. Id. Accordingly, even if the
Cox court wrongly decided the case, the fact that the Appellees complied with the judgment does not
imply that the Appellees acted under color of state law.
With respect to Richard’s second argument, Richard contends that committing a wrongful act
which influences a judgment amounts to “joint participation” with a state official. In support of this
contention, Richard relies on Dennis v. Sparks, 449 U.S. 24 (1980). In Sparks, the Supreme Court
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held that private parties acted under color of state law when they conspired with a judge. Id. at 28.
The judge’s conscious role in the illegality of the judgment caused the private parties’ conduct to be
actionable under § 1983. Id. In reaching this conclusion, the Court pointed out that “merely resorting
to the courts and being on the winning side of a lawsuit does not make a party a co-conspirator or a
joint actor with the judge.” Id.
Consistent with the Sparks holding, the Second Circuit has rejected the argument that wrongful
action by counsel qualifies as “state action” under § 1983. Dahlberg v. Becker, 748 F.2d 85, 92 (2d
Cir. 1984). In Dahlberg, the plaintiff alleged that the defendant and her attorneys submitted a false
affidavit which influenced a state court decision. Id. at 87-88. The court held that if “a judge . . .
unknowingly signs a defective order that has been prepared and submitted to him by an attorney,” this
does not imply that the attorney acted under color of state law. Id.
We agree with the Second Circuit’s reasoning in Dahlberg. If a judge reaches a decision based
on misinformation that counsel provides, the issuance of the decision does not imply that counsel acted
under color of state law. Id. Applying this principle to Richard’s situation leads us to hold that
Appellees did not act under color of state law. Like Dahlberg, and unlike Sparks, Richard does not
contend that the judge knowingly participated in the alleged conspiracy. Richard only alleges that the
Appellees conspired with opposing counsel before a judge. Although the Appellees may have colluded
with opposing counsel, Richard fails to allege that the state judge was in any way involved in the
misconduct. Indeed, Richard characterizes the state judge as “an innocent agent.” Thus, the
Appellees are not state actors under § 1983, and Richard fails to state a claim under § 1983.
The failure of Richard’s § 1983 claim persuades us that his claim serves only as a means for
challenging the state court judgment in federal court. As such, it falls within the scope of claims that
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we may dismiss “for lack of subject matter jurisdiction because of . . . [the] inadequacy of the federal
claim . . . .” Steel Co. v. Citizens for Better Environment, 523 U.S. 83, 89 (1998). Richard has
attempted to circumvent the Rooker-Feldman doctrine by intertwining a groundless § 1983 claim with
the state court findings. His jurisdictional challenge to the Shutts procedures is irrelevant because the
underlying federal claim is unfounded. Under these circumstances, applying the Rooker-Feldman
doctrine to bar his claim is entirely appropriate.
B. Richard’s RICO Claim
Richard contends that the district court erred in dismissing his claim for equitable relief in the
form of a disgorgement of the Appellees’ past profits. He argues that equitable relief should be
available for private civil RICO plaintiffs under 18 U.S.C. § 1964(a)-(c). This Court has not decided
whether equitable relief is available to a private civil RICO plaintiff. Price v. Pinnacle Brands, 138
F.3d 602, 605 n.5 (5th Cir. 1998) (stating that this Court “has specifically reserved ruling on whether
all forms of injunctive relief and other equitable relief are foreclosed to private plaintiffs under RICO”)
(internal quotations omitted). The circumstances before us do not necessitate that we reach this
question today. Even if equitable relief were available to a private party, disgorgement is not
a proper remedy given the circumstances present in this case. Section 1964(a) provides:
The district courts of the United States shall have jurisdiction to prevent and restrain
violations of section 1962 of this chapter by issuing appropriate orders, including, but
not limited to: ordering any person to divest himself of any interest, direct or indirect,
in any enterprise; imposing reasonable restriction on the future activities or
investments of any person including, but not limited to, prohibiting any person from
engaging in the same type of endeavor as the enterprise engaged in, the activities of
which affect interstate or foreign commerce; or ordering dissolution or reorganization
of any enterprise, making due provisions for the rights of innocent persons.
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18 U.S.C. § 1964(a). The Second Circuit has considered the conditions for disgorgement under this
statute in a RICO suit. United States v. Carson, 52 F.3d 1173, 1181 (2d Cir. 1995). The Second
Circuit interpreted § 1964(a) to mean that equitable remedies are only proper to “prevent and restrain
future conduct rather than to punish past conduct.” Id. at 1182. The court reasoned that the three
examples of permissible remedies in § 1964(a) were forward-looking, and focused on preventing
future RICO violations. Id. at 1181. With respect to the disgorgement remedy sought, the Second
Circuit noted that disgo rgement is generally available under § 1964. Id. However, when
disgorgement is sought for the purpose of compensating a party for past injuries, the court held that
the plain language of § 1964 bars relief. Id. at 1182.
We agree with the Second Circuit’s reasoning in Carson. Section 1964(a) establishes that
equitable remedies are available only to prevent ongoing and future conduct. Here, Richard does not
seek disgorgement to “prevent and restrain” the Appellees from producing PB plumbing systems. In
fact, in his Second Amended Complaint, Richard concedes that the Appellees no longer market the
plumbing systems. Furthermore, Richard fails to argue that such disgorgement would prevent
manufacturers of similar products from committing similar injuries. Simply stated, he fails to argue
that disgorgement would “prevent and restrain” similar RICO violations in the future. Absent this
argument, Richard’s disgorgement claim seems to do little more than compensate for the alleged loss.
The disgorgement claim is therefore impermissible under § 1964(a). By failing to state a proper
remedy, Richard’s RICO claim is void.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court to dismiss Richard’s
§ 1983 claim based on the district court’s lack of subject matter jurisdiction under Rooker-Feldman.
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We also AFFIRM the judgment of the district court to dismiss Richard’s RICO claim for failure to
state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).
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WIENER, Circuit Judge, Concurring in part and dissenting in part:
I concur with the panel majority’s disposition of this appeal in every respect except for its
treatment of the potential availability of disgorgement of profits as an equitable remedy under 18
U.S.C. § 1964. More specifically, I cannot read § 1964(a) or the Second Circuit’s opinion in United
States v. Carson1 to eschew the possibility of disgorgement in the instant case. I agree, as does the
panel majority, with the Carson court’s restriction of equitable remedies to prevent or restrain future
conduct rather than to punish past conduct,2 but, respectfully, I find illogical the panel majority’s
application of that principal to the instant case.
It is true that Richard does not seek disgorgement to prevent or restrain the production of PB
Plumbing Systems, which all acknowledge are no longer produced and marketed. The permissible
purposes of disgorgement as an equitable remedy are not, however, so limited as to be available only
to prevent or restrain the continued production and marketing of the particular product that produced
the tainted profits in question. First, because the profits disgorged in a civil RICO class action are not
necessarily distributed to the class members ratably according to the quantum of their respective
injuries, the remedy is not analogous to compensatory damages. Second, disgorgement of ill-gotten
gains is closely analogous to the equitable remedy of exemplary damages, as the principal purpose is
not simply to punish the offending parties for having conspired to make the illicit profits but to convey
a strong message, to the conspirators and to third parties alike, that there is yet another disincentive
to engaging in such proscribed conduct. Thus, it seems clear to me that the primary thrust of
disgorgement is to “prevent and restrain” the offending parties —— as well as all potential malefactors
1
52 F.3d 1173 (2d Cir. 1995).
2
Id. at 1182.
who receive the message —— from engaging in such activities with any product, not just the single
discontinued product that happened to have been the object of the proscribed behavior alleged in the
particular case.
Neither do I find it determinative that Richard failed to state explicitly in his prayer for the
disgorgement remedy that disgorgement “would prevent manufacturers of similar products from
committing similar injuries.” It has to be self-evident to courts and litigants alike that a prayer for
disgorgement of profits in a case like this one is intended to prevent and restrain similar future
conduct. To require the incantation of those talismanic words —— jurisprudential, not statutory ——
would be to require a hollow act and to elevate form over substance. By its very nature, disgorgement
is designed to “prevent manufacturers of similar products” from engaging in such conduct in the
future, making incidental at best any element of compensation to class members.
As I disagree with the conclusion of my learned colleagues of the panel majority that Richard’s
RICO claim is void for failure to state a proper remedy, I respectfully dissent.
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