A Closer Look at Civil RICO: the Person/Enterprise Distinction

Because civil RICO is both a powerful and complicated tool for recovering damages and attorney fees, the next several Blog Entries will be dedicated to further exploring the circumstances under which you can proceed with a civil RICO case. (For a brief introduction to civil RICO see my blog entry dated October 6, 2009.) Civil RICO claims are provided for in both state and federal statutes, which may differ. This blog entry will focus on RICO claims under the federal statute at 18 U.S.C. 1962(c).

To state a civil RICO claim, the plaintiff must allege that a “person” engaged in (1) “conduct,” (2) of an “enterprise” (3) through a “pattern”; (4) of “racketeering activity.” Camiolo v. State Farm, 334 F.3d 345 (3rd Cir. 2003). Each of the words or phrases in quotes must be understood in terms of definitions in the statute (if available) and in terms of definitions provided by the courts. The statute provides that the “person” (i.e. the defendant) can be “any individual or entity capable of holding a legal or beneficial interest in property.” 18 U.S.C. 1961(3). The term “enterprise” includes any individual, partnership, corporation, association, or other legal entity.” (18 U.S.C. §1961(4).) The enterprise “may be comprised of only defendants, or of defendants and non-defendants.” (U.S. v. Urban, 404 F.2d 754 (3rd Cir. 2005). It may be an association-in-fact, as opposed to a formal legal entity. Although there can be overlap between the defendant and the enterprise, they cannot be one in the same. Cedric Kushner Promotions v. King, 533 U.S. 158 (2001). This is part of what is referred to as the “distinctiveness requirement” in a RICO cause of action.

The above distinctiveness requirement is easily met if the RICO enterprise consists of more than one legal entity, or legal entities separate from the legal entity that is the enterprise. For example the RICO defendants can be all the partners of a RICO enterprise partnership. On the other hand, a RICO enterprise cannot consist of a RICO defendant corporation and its own employees. However the enterprise could consist of the defendant corporation and its network of independent, non-exclusive, agents. Likewise, a RICO enterprise can consist of a defendant corporation and its outside (but not in house) attorneys.

The take away from this blog entry is that the person/defendant distinction must be well understood to identify situations where civil RICO claims are appropriate. From the defendant’s perspective, it should also be understood to properly challenge RICO claims that should never have been brought.

The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.