The Second Circuit has broken new ground in holding an enterprise is unnecessary in RICO conspiracy claims. In City of New York v. Bello it reinstated New York City’s civil RICO case against an internet cigarette distributor for illegally failing to pay the city tax on cigarettes. The case is brought against the owners of the distributor personally, and evidence revealed two of the owners were not actually employed by the business the city named as the RICO enterprise. Ordinarily, this would make it impossible for the City to satisfy the requirement that these defendants be participating in the affairs of the enterprise, as the Supreme Court interpreted 1962(c) of RICO in its famous Reves’ decision.
But Reves dealt with claims under section 1962(c) of RICO not 1962(d), a conspiracy to violate 1962. Three other Circuits have held a modified Reves requirement applies in conspiracy claims. But three years ago, the Second circuit rejected that proposition in a criminal RICO case. Now it has rejected it in civil cases.
The implications of this decision for RICO plaintiffs is tremendous. Alleging that a RICO defendant is participating in the affairs of an enterprise has always been a big hurdle in civil cases. Generations of RICO lawyers have tried, unsuccessfully, to get their cases off the ground because they cannot allege a corporation participated in the affairs of an enterprise. They have alleged the enterprise was the corporation plus its employees, or subsidiaries, or agents–all to no avail. Has it ended, in the words of T.S. Eliot, not with a bang but a whimper? No enterprise was even needed?
There will likely a petition for certiorari to the Supreme Court to review this decision. And if not this one, then the next Second Circuit opinion reaching the same, very expansionist conclusion. The Supreme Court will accept the case, as it is always hyper-cautious about expanding RICO. This will likely be decided in the next year or two.