Under 1961(c) of the RICO statute, the plaintiff must show (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. The complaint alleged that the UCC and its members, franchisees, manufacturers, wholesalers and suppliers formed an association-in-fact, which is a kind of "enterprise" under RICO.
The court first stated that UCC could not be a participant in the alleged enterprise because a firm and its employees or a parent and its subsidiaries are not an "enterprise" separate and distinct from the firm itself. Only individual defendants, and not UCC, are possible participants in the enterprise.
The court then concluded that UCC franchisees could not be part of the RICO enterprise because franchisees are no different from employees when examining a RICO enterprise. The fact that a company chooses to operate through agents rather than employees does not make a difference in terms of preventing the type of abuse for which RICO was designed.
The court next analyzed the remaining defendants: the manufacturers, suppliers and members of United Consumers Club. It said that an "enterprise" must have an ongoing structure of persons associated through time. The changing, unnamed manufacturers, suppliers and members did not function as a continuing unit or an ongoing structure. Plaintiffs offered nothing to show that the alleged "enterprise" was anything more than UCC simply contracting with members and suppliers. No case law supports the proposition that a purchasing club's ordinary business dealings with past and present manufacturers, suppliers or members constitute a structure. Moreover, the plaintiffs failed to show that the individual defendants were associated together for a common purpose of engaging in a course of conduct. Finally, the plaintiffs failed to show the enterprise was organized in a manner amenable to hierarchical or consensual decision-making. Plaintiffs did not demonstrate that the individual defendants ever made consensual decisions as a unit to promote the alleged common purpose or that members ever contacted or dealt directly with manufacturers or suppliers.
The court ended by saying that a classic RICO association-in-fact is "a
polite name for a criminal gang or ring." The plaintiffs had not proven
the existence of such a criminal gang. Therefore, the RICO charges were
dismissed. Opinion by: U.S. District Judge Norgle. (Civil RICO Report,
December 23, 1999)
| Topic DirectBuyLawsuitsStachon1999 . { Edit | Ref-By | Attach | Diffs | r1.1 } |
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Revision r1.1 - 28 Feb 2005 - 02:20 by EliMantel
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