Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The full case caption appears at the end of this opinion. ORDER The appellee’ s request for publication is GRANTED. The memorandum disposition filed April 24, 2000, is redesignated as anauthored opinion by Judge Goodwin, with modifications. OPINION GOODWIN, Circuit Judge: Monterey Plaza Hotel Limited Partnership (the “Hotel” ) appeals the district court’ s dismissal of its complaint against Local 483of the Hotel Employees and Restaurant Employees Union, AFL-CIO (the “Union” ). The Hotel alleges that the Union violated theRacketeer Influenced and Corrupt Organizations Act (“RICO” ), 18 U.S.C. � 1961 et seq. by waging a campaign of violentpicketing, extortion and intimidation against the employees and customers of the Hotel. The appeal challenges the district court’ sruling that the Hotel failed to state predicate acts of mail and wire fraud under RICO, and that this federal action is barred by thedoctrine of res judicata. The Union agrees with the court’ s ultimate dismissal of the case, but urges us to reverse the district court’s statement of its reasons. The district court expressed the opinion that the Hotel had sufficiently stated an extortion claim underthe Hobbs Act, 18 U.S.C. � 1951, but was barred by res judicata from pursuing the claim in federal court. FACTUAL & PROCEDURAL BACKGROUND The case before us is the latest chapter in a long controversy. In June 1995, the Union filed an unfair labor practices charge withthe National Labor Relations Board (“NLRB” ) asserting that the Hotel improperly threatened and questioned Hotel employeesregarding their desire to support the Union. This charge was dismissed on December 17, 1996. In the meantime, the Hotel hadfiled a complaint against the Union in California state court seeking damages and injunctive relief against violent picketing by theUnion in front of the Hotel. See Appellee’ s Motion for Judicial Notice, Ex. B. That action was resolved on December 3, 1996 bya stipulation of the parties which imposed time, place and manner restrictions on the picketing. Acrimony continued, however, asthe Hotel filed a second suit in state court in March of 1997 claiming that the Union and its agent Maya Holmes defamed theHotel in a television news broadcast. Holmes stated (incorrectly) during the live TV interview that “the federal government hasfound that, you know, the firings [of two Hotel employees] were illegal” because they were allegedly attempting to organize Hotelemployees. The Hotel states that as a result of this statement, it suffered substantial negative publicity and a loss of potentialbusiness amounting to $1,635,339. Before the California Court of Appeal could rule on the defamation claim, the Hotel filed a RICO action in federal district courton September 10, 1997. The Hotel contends that the Union has engaged in a highly sophisticated “coordinated corporatecampaign” designed to effect the Hotel’ s economic ruin rather than to advance any legitimate bargaining agenda. The Hotel statesthat the Union has engaged “in a pattern of illegal acts, including violence, extortion, illegitimate economic coercion, mail and wirefraud, and intimidation, that amounted to racketeering activity” prohibited by RICO, specifically the Hobbs Act and the mail andwire fraud statutes. The Hotel alleges that the Union used the U.S. mail and interstate wire communications in furtherance of itsscheme to defraud the Hotel. The Union disputes the charges, and responds that it was simply exercising its constitutional right tofree speech in the context of a labor dispute. The district court held that the Hotel failed to state predicate acts of mail and wire fraud under 18 U.S.C. � � 1341 and 1343, butsaid in interlocutory language that the hotel had alleged enough to raise an extortion claim under the Hobbs Act, 18 U.S.C. � 1951.With respect to the mail and wire fraud charges, the court reasoned that the statutes protect only property interests, and notmisrepresentations made to a business’ current and potential customers. In response to the Union’ s contention that this actionshould be barred by the res judicata effect of the Hotel’ s two prior actions in California state court, the district court initiallystayed the federal case pending the resolution of the state court defamation claim. The defamation claim was subsequentlydismissed by the California Court of Appeal, as a meritless SLAPP suit (Strategic Lawsuit Against Public Participation) aimed atpreventing citizens from exercising their political rights. However, the Hotel failed to amend its federal complaint, or otherwise toargue why res judicata should not bar this action. Accordingly, the district court held in favor of the Union that the “primary rightstheory” of res judicata operated to bar the Hotel’ s federal claim. The court found that at the crux of this RICO action lay thesame harm to customer relations and business interests as was previously ruled on by the California state courts, and ordered thewhole case dismissed. The Hotel timely filed this appeal, arguing that it did indeed state predicate acts of mail and wire fraud under RICO by alleging theUnion’ s actions caused harm to the Hotel’ s goodwill, a recognized property interest in the state of California. Additionally, theHotel maintains that the district court misapplied the “primary rights test” of res judicata doctrine because neither the facts nor theharm suffered by the Hotel here are the same as alleged in the prior injunction or defamation state lawsuits. The Union urges thatthe district court’ s holding regarding res judicata and mail and wire fraud was correct, but that it wrongly announced that the Hotelhad sufficiently stated an extortion claim under the Hobbs Act. This was a misstatement of the applicable law, but it was harmless,as the case was correctly dismissed for other good and sufficient reasons. STANDARD OF REVIEW A dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) is reviewed de novo. TwoRivers v.Lewis, 174 F.3d 987, 991 (9th Cir. 1999). DISCUSSION 1. Mail and Wire Fraud The Hotel contends that the district court erred in concluding that its complaint failed to state predicate acts of mail and wirefraud under 18 U.S.C. � � 1341 and 1343. The statutes at issue, � � 1341 and 1343, are designed to prevent deceptivecommunications by wire, radio or television. They explicitly require an intent to obtain “money or property [from the one who isdeceived] by means of false or fraudulent pretenses, representations, or promises.” � � 1341 and 1343; see U.S. v. Lew, 875 F.2d219, 221 (9th Cir. 1989). The district court held that a business entity’ s customers or prospective customers do not constitute a “property” interestprotected by the mail and wire fraud statutes, and hence dismissed the Hotel’ s claims. While the district court’ s reasoning thatcustomer goodwill is not a recognized property interest, was stated too broadly to have any value as precedent, the Hotel vainlyexpected a case involving a � 1983 action to control one alleging mail or wire fraud. See Sorranno’ s Gasco v. Morgan, 874 F.2d1310, 1316 (9th Cir. 1989) (plaintiff’ s business reputation alone was insufficient to establish a protected liberty interest, but “[t]hegoodwill of one’ s business is a property interest entitled to protection” ). Section 1983 provides a remedy for deprivation offederal rights, whereas the mail and wire fraud statutes, � � 1341 and 1343, prohibit use of the mails and wires to obtain moneyor property from the one who is deceived. See Lew, 875 F.2d at 221. Thus, accepting the business usage that a hotel’ s goodwillcan be, for some purposes, a recognized property right, the Hotel has failed to prove that the Union sought to obtain that propertythrough deceptive means. More damaging to the Hotel’ s mail and wire fraud claims is WMX Technologies v. Miller, 197 F.3d 367, 374-376 (9th Cir. 1999)(en banc). We held there that the dissemination of a defamatory government report did not deprive a California business of”property” in its customer goodwill. Id. In fact, we held that while “[t]his would present a classic case for a state court defamationaction,” it would not support an action under � 1983. Id. at 375. The policy rationale behind the court’ s opinion was intended toprohibit plaintiffs from using � 1983 to remedy property deprivation or a decline in value caused by the publication of defamatoryremarks. The court said that to do otherwise “would have the anomalous effect of extending constitutional protection to thereputation of business concerns, while denying the same protection to the reputation of individuals.” Id. at 376. Hence, we affirm the district court’ s conclusion that the Hotel failed to state the requisite predicate acts of mail and wire fraud.The Union did not obtain property by deceiving the Hotel or its customers; the Union was simply carrying on a strategy in aprotracted labor dispute. The Union’ s conduct may have been vexatious or harassing, but it was not acquisitive. The purpose ofthe mail fraud and wire fraud proscriptions is to punish wrongful transfers of property from the victim to the wrongdoer, not tosalve wounded feelings. 2. Res Judicata The Union further submits that the district court’ s order should be affirmed because the allegations and asserted injury at theheart of this suit are the same as the ones presented and resolved in two prior state court actions filed by the Hotel. The Unionmaintains that the doctrine of res judicata thus bars this court from rehearing issues that have been previously litigated anddecided. The Hotel argues that both the facts and harm it alleges here differ from those at stake in its state court actions. It argues thatmass picketing subject to an injunction in November 1995, and a single defamatory statement made in March 1996 (by Unionanalyst Maya Holmes), do not involve the same primary right as its alleged loss of business income from the alleged acts of mailand wire fraud, witness intimidation and vandalism which occurred in early 1997. However, the district court found that the Hotel’ s allegations in the prior state court actions and the present case “essentiallydistilled down to allegations of harm to the Hotel’ s business and the Hotel’ s right to be free from the Union’ s disruptiveactivities.” In the Hotel’ s California business interference suit (Monterey I), the Hotel claimed that the Union’ s actions injured itsgoodwill, as well as its customer and employee relations. The broadly worded complaint sought relief from all Union acts relatingto: the alleged picketing and economic actions taken by the defendants: * * * Committing acts of harassment, intimidation and coercion, or attempting or threatening to cause or causing vandalism or property damage against, or in any manner interfering with, plaintiff’ s employees, guests, potential guests, vendors and other persons having business with the plaintiff. Although the terms of the injunction stipulated to by the parties were more limited than the events alleged in the pleadings, thesame overall harms that the Hotel alleged in state court preclude relitigation of similar claims now. See Henry v. Clifford, 32 Cal.App. 4th 315, 321 (1995) (“If the issue is alleged in the complaint and resolved by summary judgment, it may not be relitigated in asubsequent action.” ) Additionally, in the state court defamation proceeding (Monterey II), the Hotel contended that the harminvolved was “injury to its customer relations,” and that the entire loss of customer business after March of 1996 was attributableto the Union’ s defamatory remarks. Similarly, before the district court, the Hotel again maintained that it had been the victim ofharm to its business interests and customer relations because of the Union’ s defamation, mail and wire fraud, violence andintimidation. The same harms and primary rights were at stake in both the state and federal fora, even if additional facts are now beingalleged by the Hotel. While the Hotel argues that Monterey II involved only a single act of defamation, the Hotel filed a copy ofits RICO complaint with the state court before oral argument, stating “[w]e respectfully bring the related action to the Court’ sattention.” By connecting the state court slander action to the pattern of racketeering activity alleged in the federal complaint, theHotel cannot now argue that the defamation in the state action was completely unrelated to the current pattern of alleged RICOviolations. More significantly, to state a federal RICO claim, the Hotel must allege that all of the predicate acts, taken together, constitute asingle course of conduct aimed at benefitting the wrongdoer by harming the Hotel. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S.479, 496 & n.14 (1985). The Hotel thus cannot attempt to separate out prior torts (i.e., those that were subject of the state cases)from recent ones in an effort to create and preserve a new RICO claim distinct from its state causes of action. California lawholds that, when a plaintiff alleges a series of torts that form the basis of a scheme by another to divest it of property (such asunder � � 1341, 1343 or 1951), the expanded claim is considered a single cause of action arising from one primary right. SeeStoner v. Williams, 46 Cal. App. 4th 986, 1003-04 & n.14 (1996). Simply pleading different acts in the same scheme does notraise more than one primary right, provided the wrongful acts are all directed to the same injury. Nevertheless, the Hotel claims that this suit should not be barred by res judicata because many of the alleged predicate actscharged in the RICO complaint occurred after the filing of its state court actions. However, the doctrine of res judicata bars therelitigation of all events which occurred prior to entry of judgment, and not just those acts that happened before the complaint wasfiled. Eichman v. Fotomat Corp., 147 Cal. App. 3d 1170, 1177 (1983). It also operates to bar any claims that could have beenraised, not just those that actually were made. See Warga v. Cooper, 44 Cal. App. 4th 371, 377-78 (1996) (quoting Sutphin v.Speik, 15 Cal.2d 195, 202 (1940)). While the Hotel may have added new acts to its federal complaint, the new allegations areinsufficient to establish an independent or different primary right than that which the state courts have already addressed.California courts have specifically rejected the contention that new predicate acts might give rise to a different pattern ofracketeering activity and consequently a new primary right. Abdallah v. United Savings Bank, 43 Cal. App. 4th 1101, 1110(1996). Thus, the primary rights at stake in Monterey I and Monterey II are the same as those at issue in the present action: namely, theprotection of the Hotel’ s business and its right to be free from the Union’ s disruptive activities. The harm alleged is fundamentallythe same injury to business reputation and customer goodwill. This court will not allow these claims to be relitigated in the RICOcontext when they were capable of being litigated and decided in the state court. 3. Extortion The Union devotes much attention in its brief to the district court’ s statement that the Hotel’ s claims were sufficient to allegeextortion under the Hobbs Act, 18 U.S.C. � 1951. However, nothing turns on this statement because the district court’ s finaljudgment correctly dismissed the entire action. We therefore decline to address the abstract question of the correctness of thecourt’ s out of context reference to the extortion claims. CONCLUSION The allegations in the Hotel’ s complaint failed to satisfy the elements of mail and wire fraud under � � 1341 and 1343 (requiringan intent to obtain money or property from the person deceived through false representations). Furthermore, res judicata operatesto bar this RICO action because the Hotel’ s two prior California state court actions concerned the same primary right of the Hotelto operate free of the Union’ s disruptive activities. AFFIRMED.
Monterey Plaza Hotel v. Local 483 United States Court of Appeals for the Ninth Circuit Monterey Plaza Hotel Limited Partnership, Plaintiff-Appellant, v. Local 483 of The Hotel Employees and Restaurant Employees Union, AFL-CIO,Defendant-Appellee. No. 99-16714 Appeal from the United States District Court for the Northern District of California. Ronald M. Whyte, District Judge, Presiding. D.C. No. CV 97-20800-RMW/EAI. San Francisco, California. Argued and Submitted: April 11, 2000 Memorandum Filed April 24, 2000 Before: Alfred T. GOODWIN, Melvin BRUNETTI and Sidney R. THOMAS, Circuit Judges. Filed: June 7, 2000 COUNSEL: Neil O. Andrus, Jeffer, Mangels, Butler & Marmaro, San Francisco, California, Martin E. Crandall, Crandall & Associates,Dearborn Heights, Michigan, for the plaintiff-appellant. Michael T. Anderson, Davis, Cowell & Bowe, San Francisco, California, for the defendant-appellee. Thomas Wetterer, Greenpeace USA, Washington, D.C., for amicus curiae Greenpeace USA.
Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

More From ALM

Premium Subscription

With this subscription you will receive unlimited access to high quality, online, on-demand premium content from well-respected faculty in the legal industry. This is perfect for attorneys licensed in multiple jurisdictions or for attorneys that have fulfilled their CLE requirement but need to access resourceful information for their practice areas.
View Now

Team Accounts

Our Team Account subscription service is for legal teams of four or more attorneys. Each attorney is granted unlimited access to high quality, on-demand premium content from well-respected faculty in the legal industry along with administrative access to easily manage CLE for the entire team.
View Now

Bundle Subscriptions

Gain access to some of the most knowledgeable and experienced attorneys with our 2 bundle options! Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. Our second option allows you to build your bundle and strategically select the content that pertains to your needs. Both options are priced the same.
View Now

Pennsylvania Legal Awards (PALA) 2023

June 14, 2023

The Legal Intelligencer honors lawyers leaving a mark on the legal community in Pennsylvania with their dedication to law.

Learn More

Consulting Top Consultants 2023

June 15, 2023
New York, NY

Consulting Magazine identifies consultants that have the biggest impact on their clients, firms and the profession.

Learn More

Southeastern Legal Awards (SLA) 2023

June 22, 2023

The Daily Report is honoring those attorneys and judges who have made a remarkable difference in the legal profession.

Learn More


We are seeking an attorney to join our commercial finance practice in either our Stamford, Hartford or New Haven offices. Candidates should ...

Apply Now ›

Attorneys-Solicitor General Division

Attorneys Solicitor General Division: The West Virginia Attorney General's Office is accepting applications for attorneys in the Solicitor...

Apply Now ›


Regional mid-sized firm with diverse civil litigation practice seeking hardworking and dedicated attorneys with 1-5 years experience for it...

Apply Now ›



Lawyers of Distinction would like to announce...

View Announcement ›



It is our privilege & honor to announce the addition of Steven H. Cohen, Patricia Z. Boguslawski, Evan D. Baker & Kelly A. Conlon as new partners of DAVIS, SAPERSTEIN & SALOMON, P.C.

View Announcement ›



FERRO LABELLA & WEISS LLC would like to announce that....

View Announcement ›