Enterprise
To establish liability under any subsection of section 1962, a plaintiff must allege the existence of an enterprise. As noted above, an enterprise may be an illegitimate enterprise, such as a Mafia family, or a wholly legitimate enterprise, such as a corporation. United States v. Turkette, 452 U.S. 576, 580-81 (1981). Although an enterprise can be a legal entity, such as a partnership, corporation or association, it can also be an individual or simply a relatively loose-knit group of people or legal entities. These latter groups are referred to as "association-in-fact" enterprises under the statute. 18 U.S.C. § 1961(4).
Association-in-fact enterprises are probably the must useful and abundant forms of RICO enterprises, but they are also the most difficult to grasp on an analytical level. When Congress passed the RICO Act, the phrase "association-in-fact" enterprise was probably intended to apply directly to the Mafia, because a Mafia family is not a formal legal entity nor is it an individual, rather it is a "union or group of individuals associated in fact although not a legal entity." Id. Corporate parents and their subsidiaries allegedly engaged in criminal activities have also been named as association-in-fact enterprises. Most courts will accept any informal group as an association-in-fact enterprise so long as the group possesses three characteristics: some continuity of structure and personnel; a common or shared purpose; and an ascertainable structure distinct from that inherent in the pattern of racketeering. Diamonds Plus, Inc. v. Kolber, 960 F.2d 765, 769 (8th Cir. 1992).
Continuity of structure and personnel means that you cannot have a group whose membership is constantly in a state of flux. There must be something more than a fleeting consistency with regard to the number of group members and the identity of the group members.
The common purpose of making money can support the enterprise element of a RICO claim. United States v. Johnson, 430 F.3d 383, 391-92 (6th Cir. 2005); but see Baker v. IBP, Inc., 357 F.3d 685 (7th Cir. 2004) (holding that the members of an association-in-fact enterprise shared no common purpose where the employer "wants to pay lower wages; the recruiters want to be paid more for services rendered . . .; the Chinese Mutual Aid Association wants to assist members of its ethic group"). The enterprise / racketeering activity distinction requires a more detailed discussion.
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Enterprise / Racketeering Activity Distinction
Many circuits have held that a RICO plaintiff who relies on an association-in-fact enterprise must plead and establish that there is an enterprise separate and distinct from the pattern of racketeering. Odom v. Microsoft Corp., 486 F.3d 541, 549-550 ( 9th Cir. 2007) (citing cases from the Third, Fourth, Eighth, and Tenth Circuit Courts). According to these circuit courts, if the members of an association-in-fact enterprise are bound together by no more than their acts of racketeering, then the RICO claim fails because section 1964(c) requires both an enterprise and a pattern of racketeering. To the extent an enterprise carries out legitimate objectives, in addition to allegedly criminal actions, the enterprise / racketeering activity distinction is not problematic. Diamonds Plus, Inc., 960 F.2d 770 n.5 ("though it is not required, proof the enterprise conducts lawful activity unrelated to the pattern of racketeering activity will often serve to prove the enterprise is separate from the pattern of racketeering). With regard to wholly criminal association-in-fact enterprises, one court has stated:
. . . [A] distinct structure might be demonstrated by proof that the group engaged in a diverse pattern of crimes or that it has an organizational pattern or system of authority beyond what was necessary to perpetrate the predicate crimes. The command system of a Mafia family is an example of this type of structure as is the hierarchy, planning, and division of profits within a prostitution ring.
United States v. Bledsoe, 674 F.2d 647, 665 (8th Cir.), cert denied, 459 U.S. 1040 (1982). "The focus of the inquiry is whether the enterprise encompasses more than what is necessary to commit the predicate RICO offense." Diamonds Plus, Inc., 960 F.2d at 770. It is not enough than individual members of the enterprise carry on activities distinct from the pattern of racketeering; the group as a whole must have a common link other than the racketeering activity. McDonough v. National Home Ins. Co., 108 F.3d 174, 177 (8th Cir. 1997).
Not all courts have adopted the principle that the enterprise must be separate and distinct from the pattern of racketeering. The Seventh Circuit, for example, “requires that there be some kind of ascertainable structure [to the enterprise], but it does not require it to be a separate structure.” Odom, 486 F.3d at 550 (citing Richmond v. Nationwide Cassel, L.P., 52 F.3d 640, 644 (7th Cir. 1995); United States v. Rogers, 89 F.3d 1326, 1337-38 (7th Cir. 1996)).
The First, Second, Ninth, Eleventh, and D.C. Circuit Courts have “rejected any requirement that there be ‘an ascertainable structure, separate or otherwise, for an association-in-fact enterprise.” Odom, 486 F.3d at 550. In rejecting any requirement that the enterprise must be distinct from the pattern of racketeering, the Ninth Circuit reasoned:
. . . [T]]he Supreme Court’s statement in Turkette than an “enterprise” is “an entity separate and apart from the pattern of activity in which it engages” is not a statement that an associated-in-fact enterprise must have some kind of separate structure. 452 U.S. 583, 101 S.Ct. 2524. Rather, it is merely a statement of the obvious: The enterprise and its activity are two separate things. One is the enterprise. The other is the activity.
Id. at 551. The Ninth Circuit concluded that a viable association-in-fact enterprise must simply possess their characteristics: the group must have a “common purpose”, the group must function as an “ongoing organization, formal or informal,” and the various associates much function as a “continuing unit.” Id. at 552 (citing Turkette, 452 U.S. at 583, 101 S.Ct. 2524).
The enterprise / racketeering activity distinction is one of the more confusing aspects of pleading and proving a RICO claim. This issue is likely to be most problematic in those cases where a group associates for the purpose of very short-term criminal activity, the group is bound together by nothing other than the criminal purposes in which they engage, and the group possess little, if any, structure.
