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RICO — Association-In-Fact Enterprises

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The Ninth Circuit issued an en banc opinion on May 4, 2007, in Odom v. Microsoft Corp., 2007 U.S. App. LEXIS 10519 (9th Cir. May 4, 2007) ‛to correct and clarify our case law“ on the meaning of an association-in-fact enterprise. Key holdings:

1. No Separate Structure Requirement. Noting that four circuits require that an association-in-fact enterprise ‛have some kind of ascertainable separate structure,“ that four others ‛have rejected any requirement that there be an ‘ascertainable structure,’ separate or otherwise,“ and that the Seventh Circuit lies somewhere in the middle, requiring ‛that there be ‘some’ kind of ascertainable structure,“ but not that it be a ‛separate structure“ — the Ninth Circuit joined the no-structure school: ‛We take this opportunity to join the circuits that hold that an associated-in-fact enterprise under RICO does not require any particular organizational structure, separate or otherwise.“ It is not for me to speculate as to the impact of the Ninth Circuit’s vote on a future Supreme Court decision resolving this Circuit split.

2. Criteria for Ascertaining Association-in-Fact Enterprises.

(i) "Common Purpose." It is difficult to conceive of a situation in which enterprise might be pled where no common purpose existed, but the ingenuity of the bar shouldn’t be underestimated.

(ii) "Ongoing Organization." Presumably, a structure is sufficient but not required. On this issue, the existence of a contract between the associates — long a staple of association-in-fact jurisprudence in the Ninth Circuit — may be very important: ‛The alleged cross-marketing contract between Microsoft and Best Buy provides additional evidence of an ongoing organization.“

(iii) "Continuing Unit." Focusing on the language in United States v. Turkette, 452 U.S. 576, 583 (1981), requiring ‛sufficient ‘evidence that the various associates function as a continuing unit,’“ the Ninth Circuit holds that ‛the continuity requirement focuses on whether the associates' behavior was ‘ongoing’ rather than isolated activity.“ But the continuity requirement is a pattern requirement, not an enterprise requirement. At least that’s what it is outside the Ninth Circuit. But the Odom Court concludes that: ‛An almost two-year time span is far more than adequate to establish that Best Buy and Microsoft functioned as a continuing unit.“ At this point, the pattern concept of continuity has permeated the association-in-fact enterprise requirement that the associates function as a ‛continuing unit.“ Is this really a better solution than the separate or ascertainable structure requirement? It is hard to see why it would be.

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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