RICO — Association-in-Fact Enterprise — Continuing Circuit Split on Structure Requirement

Someday the Supreme Court will have to address whether structure is a necessary aspect of a viable association-in-fact enterprise under RICO. Until then, the Circuit split persists. From the Fifth Circuit decision in Matter of McCann, 2008 U.S. App. LEXIS 4978 (5th Cir. Mar. 7, 2008) (unpublished):

This Court has previously declined the invitation to expansively define an association-in-fact enterprise as merely a scheme involving two or more people. In re Burzynski, 989 F.2d at 743 ("An 'association-in-fact' enterprise perhaps could have been interpreted broadly to embrace any cooperative endeavor by two or more persons . . . . Mindful of the wisdom embodied in the federal structure of our nation, this circuit has eschewed this course."). Rather, to establish an "association-in-fact" . . . a plaintiff must show "evidence of an ongoing organization, formal or informal, and . . . evidence that the various associates function as a continuing unit." United States v. Turkette, 452 U.S. 576, 583 (1981); Shaffer v. Williams, 794 F.2d 1030, 1032 (5th Cir. 1986). The enterprise must be "an entity separate and apart from the pattern of activity in which it engages," Turkette, 452 U.S. at 583, and the association must operate "through a hierarchical or consensual decision-making structure," Elliott v. Foufas, 867 F.2d 877, 881 (5th Cir. 1989). Importantly, a plaintiff must also "establish that the association exists for purposes other than simply to commit the predicate acts." Id. (citing Montesano v. Seafirst Commercial Corp., 818 F.2d 423, 427 (5th Cir. 1987)).

Compare the Ninth Circuit on January 23, 2008, in Newcal Indus. v. Ikon Office Solution, 513 F.3d 1038 (9th Cir. 2008): “We recently held in Odom v. Microsoft Corp., 486 F.3d 541 (9th Cir. 2007), that RICO's enterprise element does not require the allegation or proof of any separate organizational structure.”

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