As I showed last time, the structural complexity and expansive language of the RICO statute, when coupled with the different (and often competing) policy aims behind criminal law enforcement and civil litigation, have forced courts to interpret the statute in ways that would make it effective, yet bounded. RICO thus presents two very different faces. Government prosecutions, on the one hand, look very much like what one would expect from an anti-racketeering, anti-Mafia statute: Typical indictments target drug distribution rings, interstate bank-robbery gangs, or the organized infiltration of a union or pension fund. Private RICO litigation, on the other hand, rarely turns on the sort of mobster activity that animated the OCCA (e.g., the organizations and crimes memorialized in films like “The Godfather” and “Goodfellas”): Typical complaints turn on allegations of fraud in insurance, franchise, or other commercial transactions. But there is at least one thing that courts, commentators, and RICO practitioners (both civil and criminal) can agree on: The concept of “enterprise” is the sine qua non of any RICO claim and the characteristic that distinguishes a RICO claim from an ordinary tort or criminal claim. Consequently, a failure sufficiently to allege an enterprise disables a claim under any substantive RICO theory.

But not only is the “enterprise” concept, which—via a specific definition— “includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity,” important to RICO jurisprudence, it has become paramount as other theories about RICO’s interpretation and application have advanced and then fallen away. Early on, in the criminal context, defendants had some luck in arguing that RICO “was intended to protect legitimate business enterprises from being preyed upon and taken over by racketeers.” Under this reading of the statute, RICO’s purpose is to criminalize the infiltration and corruption of legitimate businesses, so, for instance, operating a wholly criminal enterprise is not within RICO’s ambit. The Supreme Court disagreed, holding that “[t]here is no restriction upon the associations embraced by the definition: an enterprise includes any union or group of individuals associated in fact.” But, as Lawrence Solan astutely observes, “it is wrong to say that ‘enterprise’ could not be understood to include only legitimate businesses. Generally speaking, that is how the word is used, and the statute’s definition is not really very helpful.”

After this holding, lower courts were left to wonder whether the range of “illegitimate” associations in fact could cover something like an ordinary “conspiracy” or whether something more complicated like the Mafia was required. Most lower courts thought that it meant the latter and developed standards for identifying true “associations”—i.e., gangs that shared at least something of the Mafia’s structure of dons, capos, wiseguys, etc. Accordingly, many courts held that an association-in-fact enterprise must have an existence separate and apart from the pattern of racketeering, be an ongoing organization, and function as a continuing unit as shown by a hierarchical or consensual decision-making structure. But the Supreme Court eventually swept these restrictions away, too. Why is this important?

By interpreting the definition of “association in fact” broadly, the court effectively eliminated one of the most potent tools available to the lower courts for sorting actionable RICO sheep from non-actionable goats. The problem becomes acute in civil litigation because, to fix liability for operating or managing an enterprise through a pattern of racketeering (the most commonly alleged civil RICO claim), many courts have held that a plaintiff must prove the existence of two distinct entities: (1) a “person” and (2) an “enterprise” that is not just the same “person” referred to by a different name. This means that a corporation—even a corporation that is guilty of conducting its affairs through a pattern of racketeering—cannot be sued or prosecuted under RICO because of the statutorily required person-enterprise distinction. This poses a problem for plaintiffs in civil litigation that is not so pronounced in criminal proceedings. This is so because the government is usually interested in convicting and imprisoning individuals in RICO cases, whereas a civil plaintiff is interested in recovering money damages. Thus so, the government is often satisfied with indicting individuals who operate or manage a corporate enterprise through a pattern of racketeering. But a civil plaintiff usually needs the corporate entity to be a defendant because it has the deepest pockets, so there is a temptation to name the corporation as a defendant and part of an association in fact. All the circuits have erected some sort of requirement that the RICO “person” (i.e., the defendant) be distinct from the enterprise. But it remains an open question whether plaintiffs can elide this distinction by offering a corporation as the person/defendant and as just one member of a larger association in fact. As we’ll see, the answer to that question requires an evaluation of—and ultimate choice among—several interpretive strategies. Here, I’m going to set aside systemic and teleological-evaluative arguments and focus on a range of “plain meaning” arguments, pro and con. 

Because we can never be certain what a legislature meant, we are left to ponder what it said. Here, Congress said that a RICO “‘enterprise’ includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” Before diving into the competing lines of argument, it is probably worthwhile to settle on what is not in dispute. That is, there seems to be general agreement that any of the following can be an “enterprise”: (1) an “individual,” (2) a “partnership,” (3) a “corporation,” (4) an “association,” (5) any “other legal entity,” and a “group of individuals associated in fact although not a legal entity.” The principal grammatical-linguistic arguments, then, turn on, first, whether “union” is modified and limited by the prepositional phrase “of individuals associated in fact although not a legal entity” (and, if not, whether “union” means labor/trade union or something else) and, second, whether the entire list is to be read as an illustrative or an exhaustive definition.

Plain Meaning and Structural Arguments

At the outset, we must note that “plain meaning” analysis can take us only so far. For as members of Congress complained at the time of its consideration, RICO “embodies poor draftsmanship,” a complaint echoed in many court decisions. Nonetheless, the text is a convenient and necessary starting point. In a nutshell, the argument against including corporations in associations in fact is “that the use of ‘individual’ in RICO’s definition of ‘enterprise’ refers only to a living person.” But this argument, though compelling at first light, must be unpacked and subjected to full examination before it can be accepted. First, so the argument goes, the term “individuals” means natural persons, not corporations, partnerships, limited liability companies, and the like. Dictionary definitions of “individual,” which generally—though not universally—articulate a distinction between single humans and social groups, support this reading. Second, this distinction seems to be embodied in the structure of section 1961(4) itself, in that the first clause sets forth a series that separately lists any “individual” and “corporation” as legal types that serve as a RICO enterprise. In other words, if “individual” were intended to be a general type that includes “corporations” as a subset, then there would be no need for both terms to be included in the series—i.e., “corporation” would be superfluous, an eventuality to be avoided under general principles of statutory construction. Thus, again under general principles of statutory construction, if “individual” means “natural person” in the first clause, it must mean the same thing in the second clause.

The grammatical and syntactical counterarguments to this position are not especially compelling. Initially, one could take the flat-footed position that “individual” is used in a sense more akin to the common legal concept of “person,” which includes both human beings and fictitious entities. One can indeed find authority for this proposition, but that authority seems too slender in this context to overwhelm the specific, contextual argument set forth above. Or one could parse the second clause so that the prepositional phrase “of individuals” modifies “group” but not “union”: i.e., the second clause would mean “any union although not a legal entity” or “any group of individuals associated in fact although not a legal entity.” There are problems with this position, though. First, maintaining it requires—either explicitly or tacitly—one to rely on the “last antecedent rule” (also known as reddendo singula singulis). Under this rule, a qualifying phrase should be read to modify only the noun that it immediately follows.

But application of the rule is context sensitive and easily gives place to evaluative arguments about intent and purpose. Here, we are dealing with two nouns, “union” and “group,” that—although not exactly synonymous—are semantically linked. According to Webster’s, a “union” is a combination of individuals whose confederation is effected for “some common purpose”; a “group,” in slight contrast, is a number of individuals having “some unifying relationship.” When we reflect back on one of RICO’s undisputed purposes—viz., punishing the infiltration of labor unions—the selection of “union” makes good sense. But it is also logical that the drafters were trying to throw their net a bit wider and punish the infiltration or corruption of other unincorporated “groups” that might not have a specific “common purpose” yet might be targets for infiltration because, like unions, they possess sufficient assets or power to attract the attention of mobsters (e.g., Native American tribes, fraternal organizations, political groups, governmental boards and agencies, and sports clubs and leagues).

The point that should draw our closest attention, though, is that both “union” and “group” signal categorization—i.e., they must be linguistically coupled (either explicitly or implicitly) with the phrase “of something” and, moreover, in plain meaning terms, that “of something” is usually denoted as “of individuals.” As a further buttress, they appear in the statute as a coordinate pair, which—as a matter of human language processing—leads one naturally to interpret the phrase as modifying both disjuncts. To argue otherwise posits the reading “any union … associated in fact,” which is at once awkward and redundant. Finally, we must remember that it would have been an easy drafting exercise to uncouple “union” from “of individuals,” either by using the word “persons” in place of “individuals” or, at a minimum, reordering the syntax to read, “group of individuals associated in fact or union.” That Congress opted for neither option weighs in favor of excluding corporations from the category “associations in fact.”

Although “enterprise” is included in RICO’s definitions section, the “definition” does not lay out what conditions are necessary or sufficient for something to qualify as an “enterprise.” “Enterprise” thus remains, as Solan calls it, a “fuzzy concept at the margins.” This sets the stage for an argument over the intended effect of the definition: viz., is it illustrative or exhaustive of the types of things that can qualify as an enterprise? Those in the “illustrative” camp focus on the verb “includes” that starts the section; in rebuttal, those in the “exhaustive” camp deny that “includes” signals the presence of mere examples.

There’s much more that could be said with respect to the question of what a RICO association in fact can entail—we have not exhausted all the textual arguments that could be advanced (the means/includes argument alone could go on for quite a spell) and have not even touched on the full range of available systemic, teleological, and intentionalist arguments. But we’ve seen enough to say confidently that a good lawyer—an excellent lawyer in the way we’ve described her—is legally and ethically authorized to advance any version of these arguments that favors her client’s position (setting aside the possibility of creating a positional conflict with another client). This is so because—as is often the case—both views of the ultimate issue can be argued reasonably. And in such a case, our systemic fallback is to allow a judge to make a choice between or among competing arguments. This does not mean that we can outrun the ambiguity of a statute like RICO. Rather, it means that a defeasible decision was made for today. For as Neil MacCormick notes, “The fact that legal finality imposes a closure for the law’s practical purposes on such decision-making cannot insulate it from further inquiry at the bar of critical reason.”

Reprinted with permission from © ALM Media Properties LLC. All rights reserved.