Commercial Litigation and Arbitration

RICO: Economic “Extortion” under the Hobbs Act

From Rennell v. R. E. Fund Mgmt. Grp., LLC, 2011 U.S. App. LEXIS 6054 (7th Cir. Mar. 25, 2011):

Distinguishing between hard bargaining and extortion can be difficult. See, e.g., Stuart P. Green, Lying, Cheating, and Stealing: A Moral Theory of White-Collar Crime ch. 17 (2006). But the Supreme Court's decision in United States v. Enmons, 410 U.S. 396 (1973), and our later decisions provide helpful guidance about what activities constitute the federal crime of extortion under the Hobbs Act.

Extortion is a federal crime, as we have noted, only when property is obtained by consent "induced by wrongful use of actual or threatened force, violence, or fear . . . ." 18 U.S.C. § 1951(b)(2). The Enmons Court considered whether a union had committed extortion when its members engaged in violent acts during a strike undertaken to obtain raises from a utility company. Enmons, 410 U.S. at 397. The Court reasoned that it would be redundant to read the term "wrongful" in the Hobbs Act to describe "force, violence, or fear," which are always wrongful. Id. at 399-400. Instead, it concluded that the use of force, violence, or fear to obtain property is "wrongful" for purposes of the statute only when the alleged extortionist has no claim of right to that property. Id. at 400. Because the objective of the union's strike was to obtain compensation for which the striking workers had a lawful claim, the workers had not committed extortion under the Hobbs Act. Id. at 398, 410. While this may seem odd at first glance, the Court emphasized that the Hobbs Act was never intended to "reach violence during a strike to achieve legitimate collective-bargaining objectives." Id. at 404.

We have understood Enmons to be limited to the context of organized labor. In United States v. Castor, 937 F.2d 293 (7th Cir. 1991), we considered the defendant Castor's efforts to engage Smokey Mountain Chew, a maker of chewing tobacco substitutes, in a marketing agreement. Castor used the threat of force to bring Smokey Mountain Chew on board. Id. at 295. We held that the Enmons claim-of-right defense did not apply. "Whatever the contours of that defense may be," we said, "they do not reach extortions based on threats of physical violence outside the labor context.. . . [Y]ou cannot beat someone up to collect a debt, even if you believe he owes it to you." Id. at 299 (internal citations omitted).

Along similar lines, we have held that a defendant can be liable under the Hobbs Act for the wrongful exploitation of fear to obtain property, even if there is no explicit threat. See United States v. Lisinski, 728 F.2d 887, 891 (7th Cir. 1984). The defendant in Lisinski demanded money from a restaurant owner who was in danger of losing his liquor license, in exchange for the defendant's efforts to influence the Illinois Liquor Control Commission. Even though the defendant had not explicitly threatened the restaurant owner, we found that the wrongful use of fear and the lack of any claim of right to the victim's property could be extortion under the Hobbs Act. Id. at 892.

In sum, extortion under the Hobbs Act can occur outside of the labor context when a person uses physical violence or the threat of violence to obtain property, whether or not the defendant has a claim to the property. If a defendant has no claim of right to property, the use of fear to obtain that property--including the fear of economic loss--may also amount to extortion. In contrast, where the defendant has a claim of right to property and exerts economic pressure to obtain that property, that conduct is not extortion and no violation of the Hobbs Act has occurred. See United States v. Sturm, 870 F.2d 769, 773 (1st Cir. 1989); Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 523-24 (3d Cir. 1998).

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