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SCHWARTZ v. UPPER DECK CO.

March 11, 1997

MARTY SCHWARTZ, et al, Plaintiff,
v.
THE UPPER DECK COMPANY, Defendant.



The opinion of the court was delivered by: BREWSTER

 I. CASE TYPE AND JURISDICTION

 This is a civil RICO class action against the manufacturer and marketer of packaged sports and entertainment trading cards for allegedly organizing and participating in a pattern of racketeering activity through the distribution of its trading cards. This Court has jurisdiction based on 28 U.S.C. § 1331 and 18 U.S.C. § 1964(c). The defendant filed a 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted.

 II. BACKGROUND

 A. The Parties

 Defendant, The Upper Deck Company (Upper Deck) is the third largest manufacturer and marketer of sports and entertainment trading cards in the United States with its principal corporate offices in Carlsbad, California. Founded in 1988, Upper Deck is a privately held company that describes itself as the "leading manufacturer to bring involvement to the trading card business through its high quality, full-color baseball, basketball, football, hockey, motor sports and animation-style cards for sports fans and collectors." In 1992, Upper Deck's revenues from the sale of its trading cards exceeded $ 80 million.

 The plaintiffs propose to bring this action on behalf of those similarly situated who have purchased Upper Deck's trading cards. The representatives of the proposed class include: (1) Marty Schwartz from Port Washington, New York; (2) Lance Kuba from Woodbury, New York; (3) Bruce Laxer from North Caldwell, New Jersey; and (4) Patricia Sullivan from New Hyde Park, New York (suing on her own behalf and as guardian ad litem for her son).

 B. The Alleged "Gambling Activity"

 The complaint alleges that the packaging and distribution of Upper Deck's sports and entertainment cards constitutes a gambling activity. Upper Deck manufactures cards, packages them in a sealed wrapping, and distributes them to retailers across the country. Each package contains a pre-set number of cards; however, the package does not disclose or describe the specific cards contained therein. Instead, on the back of the package, in very small print, it states that the package "contains a random assortment" of numbered trading cards (regarding one specific sport or subject such as football or basketball). The package also provides that "randomly inserted into these specially marked packages are the following insert cards." The label then lists various types of cards and the odds of receiving one of the cards in that particular package. *fn1" Plaintiffs allege that the random insertion of cards manufactured in limited quantity, or "chase" cards, *fn2" constitutes illegal gambling under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1964.

 III. DISCUSSION

 A. Standard of Law: 12(b)(6) Motion to Dismiss

 A motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of the claims in the complaint. A claim can only be dismissed with prejudice if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). This court must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from them, and must construe the complaint in the light most favorable to plaintiff. NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986); Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). The court need not, however, accept every allegation in the complaint as true; rather, the court "will examine whether conclusory allegations follow from the description of facts as alleged by the plaintiff." Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (citation omitted).

 B. Governing Law: Civil RICO

 Congress enacted the Racketeer Influenced and Corrupt Organizations Act ("RICO") with the specific intent to "thwart the organized criminal invasion and acquisition of legitimate business enterprises and property." Oscar v. University Students Co-Operative Assn., 965 F.2d 783, 786 (9th Cir.), cert. denied, 506 U.S. 1020, 121 L. Ed. 2d 581, 113 S. Ct. 655 (1992). Section 1964(c) provides that:

 
any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including reasonable attorney's fees.

 18 U.S.C. § 1964(c). However, federal courts have established that RICO was "intended to combat organized crime, not to provide a federal cause of action and treble damages to every tort plaintiff." Oscar, 965 F.2d at 786.

 The substantive provision of RICO, § 1962, describes the prohibited activities and provides for three different causes of action. Section 1962(a) provides that:

 
it shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity . . . 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 which affect, interstate or foreign commerce.

 18 U.S.C. § 1962(a). Section 1962(b) provides a cause of action for acquiring or maintaining an interest in or control of any enterprise engaged in interstate commerce using funds from racketeering activity. Section 1962(c) provides:

 
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 a pattern of racketeering activity [.]

 18 U.S.C. § 1962(c). Finally, section 1962(d) provides a cause of action for conspiring to violate any of the provisions in subsections (a), (b), or (c). Plaintiffs allege causes of action ...


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