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RICO — Successor Entities Are Insufficiently Distinct to Comprise an Enterprise

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From Leisher v. Wachovia Mortgage, Inc., 2011 U.S. Dist. LEXIS 3037 (S.D. Cal. Jan. 12, 2011):

The moving Defendants contend that the RICO claim should be dismissed on the basis that it is inadequately pled.

"To state a claim under RICO, 18 U.S.C. § 1962(c), a plaintiff must demonstrate: (1) the conduct; (2) of an enterprise; (3) through a pattern; (4) of racketeering activity." *** RICO defines an "enterprise" to include "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). The defendant "must be a separate and distinct entity from the 'enterprise.'" *** "Although the Ninth Circuit has not decided whether a parent and its subsidiary satisfies this distinctiveness requirement, other circuits have decided that these entities generally are not sufficiently distinct." In re Countrywide Fin. Corp. Mortg. Marketing and Sales Practices Litig., 601 F. Supp. 2d 1201, 1213-14 (S.D. Cal. 2009) (citations omitted). ***

The Complaint alleges that "Defendants Wachovia, World Savings and Wells Fargo ... engaged in the formation and continued operation of a conspiracy with each other to obtain monies from Plaintiff and other real property owners." *** The Court takes judicial notice of official records submitted by Defendants showing that at the end of 2007, World Savings Bank changed its name to Wachovia Mortgage, FSB, and on November 1, 2009, Wells Fargo Bank, N.A. became the successor by merger to Wachovia Mortgage, FSB. *** Because the only alleged members of the RICO enterprise are successor entities, the Complaint fails to satisfy RICO's distinctiveness requirement. Accordingly, the Complaint fails to adequately allege an enterprise.

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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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