Thursday, December 15, 2005

Supreme Court Grants Certiorari in Another Civil RICO Case

After having one civil RICO case dropped from its calendar in mid-November, the Supreme Court has now added a second RICO case to its docket in the past two weeks.  The Court granted certiorari in Mohawk Industries, Inc. v. Williams, involving a putative class-action against the company and third-party temporary-worker agencies alleging that workers illegally in the U.S. were employed to suppress wages of other workers at Mohawk Industries.  The district court dismissed the RICO claims under a Rule 12(b)(6) motion for failure to state a claim, and the Eleventh Circuit reversed (411 F.3d 1252 -- opinion here).  The question presented is whether a corporation and its agents can constitute an "enterprise" under RICO Sec. 1962(c) when the conduct of the enterprise takes place through the corporation's agents only. 

The issue is one that the Court did not address in its opinion in Cedric Kushner Promotions v. King, 533 U.S. 158 (2001), which held that a corporation is separate from its sole shareholder for the purpose of meeting the "person-enterprise rule" for a Sec. 1962(c) claim.  Under the statute, a "person" must operate the "enterprise" to be liable, so that a corporation (or other organization) cannot be both the enterprise and a defendant in the case.  Mohawk Industries will have to resolve a split in the circuits regarding whether a corporation is distinct from its agents whose conduct is attributed to it for the purpose of deciding whether the corporation conducted or participated in the conduct of the RICO enterprise. 

If this seems hopelessly complex, welcome to the wonderful world of RICO.  As with many decisions in this area, the procedural posture is the key because defendants seek to dismiss cases at the pleading or summary judgment stage rather than risk going to trial when faced with the prospect of treble damages and attorney's fees (the holy grail of all litigation).  If the corporation is successful on this issue, then it will make it more difficult to file RICO complaints against businesses as defendants based solely on the conduct of their agents that can survive pre-trial dismissal.

The Court's other RICO case is Anza v. Ideal Steel Supply Corp. (see earlier post here), which involves the "injury to business or property" requirement for a civil case that also was dismissed before trial.  The cases will be closely watched to see if the Court will continue a recent trend toward reading RICO more narrowly and making it more difficult to plead a claim under the statute. (ph)

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