In Boyle v. United States,1 the U.S. Supreme Court revisited the definition of "enterprise" in the Racketeer Influenced and Corrupt Organizations Act (RICO),2 an issue it first decided in 1981 in United States v. Turkette.3 The Court held that an enterprise must have some structure, but declined to require "an ascertainable structure beyond that inherent in the pattern of racketeering activity." To require the jury in a criminal case to find an enterprise had an ascertainable structure, the Court concluded, would be "redundant and potentially misleading."
In the Court's view, to find the pattern of racketeering activity and enterprise beyond a reasonable doubt would necessarily mean that the enterprise providing the scaffolding for the RICO pattern would be ascertainable. The level of confidence required by that higher evidentiary standard means that unless the jury determined the RICO structure to be ascertainable, it could not find that it was proven. Moreover, in some cases, the enterprise and pattern elements are coterminous, the Court concluded.
does not bar lower courts in future cases, especially civil ones, from incorporating the term "structure" in jury instructions. The Court simply held that that is not required. More important, in a civil case, governed by the lower preponderance-of-evidence standard, the Court's rationale would not prohibit a trial court from telling the jury that it must find an "ascertainable structure."
Defining an 'Enterprise'
According to §1961(4), an 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.
Note that there is no definition of "enterprise." Instead, Congress provided a list of legal and non-legal entities that inclusively describe an enterprise.
The meaning of partnerships, corporations or unincorporated associations is not controversial. The phrase "other legal entity" could simply refer to an equitable trust or a limited liability company. The definitional problems stem from the last clause of §1961(4): "group of individuals associated in fact although not a legal entity." The difficulties in interpreting this clause have thus far arisen acutely in criminal cases under §1962(c).4
The 1981 'Turkette' Ruling
In Turkette, the issue was whether an enterprise, however defined, encompassed legitimate and illegitimate businesses.5 Without difficulty, the Court, 8-1, answered in the affirmative.
The enterprise was defined as "a group of individuals associated in fact for the purpose of illegally trafficking in narcotics and other dangerous drugs, committing arson, utilizing the United States mails to defraud insurance companies, bribing and attempting to bribe local police officers, and corruptly influencing and attempting to corruptly influence the outcome of state court proceedings...."6
The Court, in passing, noted facts relevant to the issue of a RICO enterprise structure. For example, the Court pointed out the defendant's "alleged leadership of this criminal organization," and stated that the evidence focused on the "professional nature of this organization."7 Leadership role and professional operation entail structure: leadership means a hierarchical structure, and a professional organization implies a set of rules governing members' conduct.
The Court also intimated that the RICO enterprise needed to have organization, continuity, and relationships among its participants: An enterprise "is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit."8 The Court, significantly, noted that proof of an enterprise and a pattern "may in particular cases coalesce."9
The courts of appeals, after Turkette, fell into two general categories in construing a RICO enterprise. The majority required that the association-in-fact enterprise have some structure - - "even an "ascertainable structure - - separate from the pattern of racketeering activity in which it engages.10 The minority did not require an "ascertainable structure."11 Moreover, some courts of appeals held that the enterprise and RICO pattern could in fact merge in some cases.12
This Year's 'Boyle' Decision
In Boyle,13 the Court held that "an enterprise must have a 'structure' but that an instruction framed in this precise language is not necessary." Specifically, the Court declined to require the instructions to inform the jurors, in a criminal case, that they must find an "ascertainable structure," and indeed stated that no reference to "structure" is mandated.
The alleged enterprise consisted of a "core group, along with others who were recruited from time to time" to commit a series of bank thefts. The group would meet beforehand and plan its criminal acts, gathering the needed tools and assigning roles to the participants. Significantly, the "group was loosely and informally organized. It does not appear to have had a leader or hierarchy; nor does it appear that the participants ever formulated any long-term master plan or agreement."
Over defendant's objection, the trial court instructed the jury that it could find an enterprise based on "an association of individuals, without structural hierarchy," and that common sense suggests that an association-in-fact enterprise "is oftentimes more readily proven by what it does, rather than by abstract analysis of its structure." In contrast, the defendant had requested that the court charge that an enterprise required (1) "an ongoing organization," (2) "a core membership that functioned as a continuing unit," and (3) "an ascertainable structural hierarchy distinct from the charged predicate acts."
Writing for the majority, Justice Samuel Alito upheld the district court's instruction and affirmed the conviction. The Court divided the question presented into three separate parts:
- First, must an association-in-fact enterprise have a "structure"? The Court, agreeing with the defendant, required a structure containing "at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purpose."
- Second, must the structure be "ascertainable"? The Court concluded that, in a criminal case, this would be redundant: "Whenever a jury is told that it must find the existence of an element beyond a reasonable doubt, that element must be 'ascertainable' or else the jury could not find that it was proved. Therefore, telling the members of the jury that they had to ascertain the existence of an 'ascertainable structure' would have been redundant and potentially misleading."
- Third, must the "structure" go "beyond that inherent in the pattern of racketeering activity" in which its members engage?14 The Court first noted that "enterprise" and "pattern of racketeering activity" are separate elements that must each be proven beyond reasonable doubt. The Court conceded that proof of one element does not necessarily establish the other.15 Nonetheless, the Court concluded that in some cases proof of the elements of enterprise and pattern of racketeering activity may "coalesce."
Struggling With the Term in Civil RICO
A veteran of the ultimately futile efforts to reform RICO in the 1980s and 1990s once said: "The problems with civil RICO stem largely from the breadth and vagueness of criminal RICO."16
While understandable, it is to be regretted that the Court's only occasions to consider the definition of a RICO enterprise have come in the criminal context. In criminal cases, defendants typically challenge the enterprise, and the courts, faithful to the congressional enactment, have interpreted the statutory language broadly.
In civil cases, corporate defendants often dispute the existence of a pattern of racketeering activity. But, as Boyle demonstrates, the proper definition of the enterprise in civil RICO cases merit closer scrutiny in the future.
Given the breadth of predicate acts contained in §1961(1), any association of individuals committed to a life of crime (e.g., traditional organized crime families or drug gangs) sooner or later is bound to engage in sufficient criminal activities that amount to a RICO pattern. Because of the raison d'être of such organizations and the danger their existence and behavior pose to members of civil society, the courts will likely seek to stretch the protean concept of enterprise to find structure in cases brought against such organizations. The nature of these criminal organizations is such that whatever their precise form or function, their essence is to provide some structure within which criminal conduct occurs.
This is not, however, the case in civil RICO cases against a legitimate business organization whose purpose is not the promotion of criminal conduct. To the extent that individuals within such business organizations subvert their legitimate purposes and engage in crimes, those individuals, and whatever structure they form to pursue their illegal acts, are a subset of the corporate entity. As such, in deciding whether they form an enterprise for RICO purposes, the structure of the legitimate business organization should not be readily and without discussion imputed to the alleged miscreants.
Yet, that is very often how the issue of enterprise in civil RICO cases under §1962(c) has been litigated in the past.17 Plaintiffs have generally defined the RICO enterprise as a corporation or group of corporations whose operations the defendants, often their officers or employees, operated through a pattern of racketeering activity. When the individuals who allegedly engaged in wrongful conduct are senior officers of one corporation, and the plaintiff's attorneys make the corporation a defendant in the civil RICO case, in order to avoid the rule that the named defendants cannot also be the RICO enterprise, plaintiffs have almost always alleged an association-in-fact of the individual officers and their corporation as the enterprise. There has been precious little litigation on the civil side regarding the nature of such alleged RICO enterprises.
Corporate defendants may now want to focus the courts' attention in civil cases on whether the RICO enterprise, quite apart from the corporate structure, has any structure of its own and indeed whether such structure is ascertainable. It must not be assumed that the perfectly legal business structure of the corporate organization ipso facto provides the needed organizational structure of the alleged RICO enterprise.
Even if individuals within otherwise reputable organizations infrequently engage in conduct that may amount to violations of the RICO statute, such organizations are not formed for the purpose of engaging in criminal acts. Therefore, in any civil RICO case alleging a non-legal association-in-fact enterprise, the individuals forming the enterprise and their activities must contain the required structure.18 In such cases, persuading the trial court to give the jury an instruction that the alleged RICO enterprise must be proven to have an ascertainable structure may well be appropriate after Boyle.
Moreover, as the Court noted in Boyle, it was not necessary to require that the jury find an ascertainable structure due to the beyond-a-reasonable doubt standard. But in civil cases the plaintiff's evidentiary burden is lower: preponderance of the evidence. In such a situation, unless the jury is instructed in greater detail, it may well improperly conflate the elements of enterprise and pattern of racketeering in all cases.
To avoid this error, the more detailed analysis of these elements articulated in Boyle should be included in the court's instructions in a civil case. It is certainly appropriate now for counsel, in reliance on Boyle, to ask trial judges to grant such instructions. Indeed, to the extent that the RICO enterprise must be proven to have an ascertainable structure in civil cases, it is an issue appropriate to raise on motions to dismiss the pleading or for summary judgment.
The Court's approach to interpreting RICO appears to be to make broad pronouncements consistent with the breadth of the statutory language, but to decide criminal cases on the narrowest of grounds.
Thus, in Boyle, the Court held that an enterprise needs structure and, while it did not require in that case an instruction to mention "structure," it did not forbid trial courts from using that term, even in an appropriate criminal case. In such cases, there is no need to ask the jury to find, the Court concludes, an ascertainable structure, but that leaves open the issue for civil cases.
The Court's approach thus provides creative ambiguity in its rationale while strictly and narrowly applying its rationale to the criminal cases to uphold the convictions. The creative ambiguity leaves ample room for lower courts to craft standards in civil and perhaps some criminal cases to do justice in the particular case.