Commercial Litigation and Arbitration

RICO — Horizontal and Vertical Relatedness

United States v. Cain, 2012 U.S. App. LEXIS 1772 (2d Cir. Jan. 31, 2012):

The substantive RICO provision under which the defendants were convicted makes it unlawful for "any person employed by or associated with any enterprise . . . to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). Section 1962(d), in turn, makes it "unlawful for any person to conspire to violate" the substantive provisions of RICO. To satisfy the "pattern of racketeering activity" requirement, the statute requires "at least two acts of racketeering activity . . . the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity." 18 U.S.C. § 1961(5). Following Supreme Court precedent, however, we have held that the commission of two racketeering acts in furtherance of the RICO enterprise is not alone sufficient to establish a RICO pattern. See United States v. Indelicato, 865 F.2d 1370, 1376 (2d Cir. 1989) (en banc), citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497 n.14, 105 S. Ct. 3275, 87 L. Ed. 2d 346 (1985). Rather, "a RICO pattern may not be established without some showing that the racketeering acts are interrelated and that there is continuity or a threat of continuity." Indelicato, 865 F.2d at 1381. Our subsequent decisions have labeled the requirement that the predicate acts be related to one another "horizontal relatedness" and the requirement they have a nexus to the enterprise "vertical relatedness." See United States v. Burden, 600 F.3d 204, 216 (2d Cir. 2010).

The jury charge in this case failed to ensure that the horizontal relatedness and continuity requirements were met. The court instructed the jury that in order to satisfy RICO's pattern requirement, the government need only prove "that the defendant committed at least two of [the charged] racketeering acts within 10 years of each other." That was error, as our decision in Indelicato makes clear. Moreover, because a conspiracy charge under Section 1962(d) requires proof that "the conspirators reached a meeting of the minds as to the operation of the affairs of the enterprise through a pattern of racketeering conduct," United States v. Basciano, 599 F.3d 184, 199 (2d Cir. 2010) (emphasis added), the erroneous pattern instruction infected the jury's deliberations with regard to the conspiracy count as well.

The government suggests, however, that the error was harmless in light of the jury's finding that the predicate acts had a nexus to the charged enterprise (an issue on which the jury was properly instructed). It is true that, in the context of sufficiency-of-the-evidence review, we have held that "the requirements of horizontal relatedness can be established by linking each predicate act to the enterprise, although the same or similar proof may also establish vertical relatedness." United States v. Daidone, 471 F.3d 371, 375 (2d Cir. 2006). But that analysis presumes a properly instructed jury whose attention has been called to the distinct nature of the vertical and horizontal relatedness requirements. As the Supreme Court has noted in discussing the relationship between the pattern requirement and RICO's enterprise element, "while the proof used to establish these separate elements may in particular cases coalesce, proof of one does not necessarily establish the other." United States v. Turkette, 452 U.S. 576, 583, 101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981). Given the possibility that, if properly instructed, the jury in this case might have found that the proven predicates were not in fact interrelated, we cannot say that the district court's error was necessarily harmless. Indeed, in United States v. Long, faced with a case in which the district court had likewise failed to instruct the jury with regard to relatedness and continuity, we rejected precisely the argument that the government makes here, noting that "[t]he erroneous RICO pattern instruction prevented the jury from validly determining whether the requisite pattern existed." 917 F.2d 691, 698 (2d Cir. 1990).

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