The opinion of the court was delivered by: ROYCE LAMBERTH, District Judge
This matter comes before the Court after the completion of a bench
trial and the submission of proposed findings of fact and conclusions of
law by the parties. The purpose of the trial was to resolve the remaining
outstanding issues that barred final resolution of the case. The Court
resolved the bulk of the legal issues in two prior opinions. In July 2001
the Court issued an opinion resolving the parties' cross motions for
summary judgment. Regency Communications. Inc. v. Cleartel
Communications, Inc., 160 F. Supp.2d 36 (D.D.C. 2001) ("Regency I").
In My 2002 the Court denied defendants' motion for reconsideration.
Regency Communications, Inc., v. Cleartel Communications, Inc.,
212 F. Supp.2d 1 (D.D.C. 2002) ("Regency II"). Upon consideration of the
evidence presented at trial, the parties' proposed findings of fact and
conclusions of law, and the applicable law in this case: the Court finds
plaintiffs met their burden of proof on damages for breach of contract
against Cleartel and therefore shall award Regency damages in the amount
of $25,580.27 against Cleartel and shall award Actel damages in the
amount of $23,147.22 against Cleartel. Furthermore, the Court finds for
the plaintiffs on their claims under 18 U.S.C. § 1962(c) and 1962(d)
against defendants Auger and Groh and shall
award treble damages on those claims pursuant to
18 U.S.C. § 1964(c). Therefore the Court shall award Regency the amount of
$76,740.81 against defendants Auger and Groh and shall award Actel the
amount of $69,441.67 against defendants Auger and Groh. Plaintiffs are
farther permitted to submit a bill of costs and fees in accordance with
18 U.S.C. § 1964(c).
Plaintiffs Actel and Regency are companies that owned large numbers of
pay telephones in the state of New Jersey and are generally referred to
as Customer Owned Coin Operated Telephone companies or COCOTs. Typically,
a COCOT negotiates a contract with a location owner such as a convenience
store to place a payphone at the location owner's premises and will pay
the location owner a share of the revenues earned from the payphone. In
order to provide telephone services such as long distance and operator
assistance to their pay phones and to obtain billing and collection
services for themselves, a COCOT contracts with an Operator Service
Provider or OSP such as defendant Cleartel.
In the present case, plaintiffs Actel and Regency respectively entered
into contractual relationships with defendant Cleartel to provide
operator services. Actel signed three separate contracts with Cleartel,
dated 1990, 1991, and 1998. (Pls.' Ex. 1, 2, and 3). Regency entered into
a single contract with Cleartel in 1996, (Pls,' Ex. 4). As the conduct at
issue in this suit began in 1995, only Actel's 1990 contract is not at
The most salient provisions of each contract are those that define and
arrange the revenue sharing between the plaintiff and defendant They are
most easily understood from the perspective of a typical payphone call.
An end user makes a call from one of Actel's pay phones and opts to bill
the charges for that call to his home phone. The end user pays three
types of fees for the call all of which are billed and collected by
Cleartel and then distributed according to the
terms of the contract with plaintiffs. First, the end user pays a
location surcharge a flat fee for the use of the phone
that is paid 100% to the plaintiffs. Second, the end user pays an
operator handling charge a flat fee determined by the type of
assistance the operator renders for the end user, e.g. collect calls,
third party calls that is divided between Actel and Cleartel.
Third, the end user pays a per minute charge that is likewise
divided between Actel and Cleartel. The operator charges and the per
minute charges are split according to a contractually established
percentage. For example, the 1998 Regency contract (Pls.' Ex. 4) provides
a "Schedule A" that sets forth the varying commission percentages for
different types of calls, e.g. intrastate, interstate. After a call is
completed, Cleartel, through other companies, sends a bill to the end
user for the sum of the charges.
Plaintiffs initiated this suit in 1998 after discovering that Cleartel
was not reporting all of the charges that it assessed end users for a
phone call. Furthermore, Cleartel was not paying plaintiffs any
percentage of those hidden charges. Plaintiffs' discovery occurred purely
by accident. After making test phone calls from one of the company's
payphones, Regency's owner discovered that the amount that appeared on
his monthly phone bill, which was administered by the local phone
company, was greater than the amount of the charge for that exact call
that Cleartel reported as billing the end user on the monthly statement
it sent to Regency. Only by comparing this discrepancy did Actel and
Regency ever discover that Cleartel was assessing additional charges and
not reporting those charges to plaintiffs.
In July 2001, the Court issued an opinion resolving cross motions for
summary judgment, Regency I.*fn1 In Regency I the
Court first observed that "Cleartel readily admits that (1) the
commission paid to Regency and Actel was based on amounts less than
actually charged to the
end user, and (2) it charged the end user more than it reported to
Regency and Actel." 160 F. Supp.2d at 40. The Court found such actions to
be violations of the contracts between defendant Cleartel and plaintiffs
Regency and Actel and granted summary judgment for plaintiffs Regency and
Actel on their breach of contract claim against Cleartel. Cleartel's
failure to pay commissions to plaintiffs based on the amounts actually
charged to end users violated section 2.1 of the contracts.*fn2
Id. Similarly, Cleartel's failure to report the actual amount
it was charging end users in its monthly statements to plaintiffs
violated section 2, 4 of the contract.*fn3 Id. The Court
granted summary judgment for the defendants on Mark Parrella's breach of
contract claim and on Regency and Actel's breach of contract claims
against the individual defendants.
The Regency I opinion also considered plaintiffs' claim that
defendants violated section 1962(c) and 1962(d) of the Racketeer
Influenced and Corrupt Organizations Act ("RICO"),
18 U.S.C. § 1962(c), 1962(d), in light of defendant's motion for summary
judgment on that claim and made the following findings: (1) "enough evidence
exists for a reasonable jury to find that the defendants utilized the mail
to deceive the plaintiffs," 160 F. Supp.2d at 44; (2) "Regency and Actel
were the intended targets of the alleged RICO violations," Id. at
45; (3) "Cleartel is alleged to be an `enterprise,'" Id.; (4)
plaintiffs' allegations that defendants "deceived them by withholding
information and monies multiple times over a several year period"
represents an "adequately alleged  `pattern of racketeering activity,'"
Id. at 46; (5) because the "predicate acts all stemmed from
identical long distance service contracts between the parties . . . the
predicate acts are clearly `related' and constitute a `closed period of
repeated conduct,'" Id.: (6) plaintiffs sufficiently pleaded
conspiracy and introduced evidence in their motion for summary
judgment to "enable a jury to reasonably infer that the
individually named defendants conspired." Id.
Regency I further granted summary judgment for defendants on
plaintiffs' fraud claims, but held that the dismissal of the fraud claims
did not affect the viability of plaintiffs' RICO claims. Id. at
41, 43. The Court also granted summary judgment for plaintiffs on
defendants' counterclaims Id. at 46.
After Regency I three of the plaintiffs' claims remained for
trial. First, because plaintiffs prevailed on liability on the breach of
contract claim brought by Regency and Actel against Cleartel, the sole
remaining issue on the breach of contract claim is the issue of damages.
Second, having survived summary judgment, plaintiffs must present factual
evidence to support then two RICO claims,
18 U.S.C. § 1962(c), and 1962(d). In August 2003, the Court held a bench
trial to allow the parties to present evidence on these issues.
A. The Breach of Contract
There are three contracts at issue in this case. Plaintiff Actel and
defendant Cleartel entered into a contract in 1991, (Pls.' Ex. 2),
covering the time period from 1991 to 1998, and a second contract in
February 1998, (Pls.' Ex. 3), which lasted until terminated in November
1998. Plaintiff Regency entered into one contract with Cleartel in April
1996. (Pls.' Ex. 4). These three contracts will be referred to
collectively as "the contracts" with differences noted as required.
In 1995 Cleartel and its key employees, including defendants Auger and
Groh, observed that their business was suffering decreased profitability.
The main driver appeared to be an increase in uncollected charges.
Cleartel would process the call data from plaintiffs' payphones and pay
plaintiffs on a thirty day cycle as required by section 2.4 of
the contracts. (Pls.' Ex. 2 at
1; Pls.' Ex. 3 at 1; Pls.' Ex. 4 at 1). Defendants submitted the
call charge data to third parties who would in turn bill the end users
and collect payments. As the payments from end users were collected the
third parties would remit payment to Cleartel. In 1995 defendants
observed that the amounts collected were decreasing; in other words,
their uncollected charges, or uncollectibles were increasing. Until that
time the only means of protection against the risk and incidence of
uncollected charges was the percentage of COCOT commissions that were
held back to offset uncollectibles pursuant to section 2.3 of the
Defendants' solution was to implement a direct charge against end users
and keep 100% of the revenue from this charge for themselves. This charge
was in addition to the standard operator handling charges, per
minute charges, and location surcharges that were already assessed
against an end user who made a phone call. Defendants labeled this charge
the Uncollectible Cost Recovery Surcharge ("UCRS"). Defendants neither
paid a commission nor reported the existence of the UCRS to plaintiffs.
In Regency I the Court found that defendant Cleartel ...