Civil Rico Update: the Evolving Pattern Requirement-part Ii
| Publication year | 1987 |
| Pages | 1004 |
1987, June, Pg. 1004. Civil RICO Update: The Evolving Pattern Requirement-Part II
Part I of this article, published in the May 1987 issue of The Colorado Lawyer at page 806, discussed the definition of "pattern of racketeering activity" in the Racketeer Influenced and Corrupt Organizations Act ("RICO"),(fn1) and the evolution of the "pattern" doctrine in various federal court decisions following the U.S. Supreme Court opinion in Sedima, S.P.R.L. v. Imrex Co.(fn2) This Part II focuses on "pattern" decisions within the U.S. Court of Appeals for the Tenth Circuit and Colorado, problems of pleading and proof, and the Colorado Organized Crime Control Act ("COCCA"),(fn3) a state statute modeled after RICO.
Colorado's federal court, in its post-Sedima pattern decisions, consistently has dismissed RICO claims. The first case to address the issue was Miller v. Calvin.(fn4) Closely following the landmark pattern holding of Northern Trust Bank/O'Hare, N.A. v. Inryco, Inc.,(fn5) Judge Finesilver decided that allegations of acts furthering a "single fraudulent scheme" (promoting a stock sale) were insufficient to form a pattern.(fn6) Subsequent opinions by the same judge have taken the same approach. One case held that "several predicate acts may not establish a pattern of racketeering activity where those acts are directed toward a single fraudulent scheme."(fn7) In another, he decided that "predicate acts as well as multiple schemes amounting to a pattern of racketeering activity" must be sufficiently alleged.(fn8)
In a leading pattern case, Torwest DBC, Inc. v. Dick,(fn9) Judge Matsch imposed similar requirements while indicating that he may be more flexible in finding continuity. Several factors were suggested that should be considered in finding a pattern:
Citing the Sedima majority's suggestion in Note 14(fn11) that relatedness required similar purposes, results, participants, victims or methods of commission, the Torwest court decided that differences in these elements were also needed to show continuityCourts should look to the purpose, results, participants, victims and methods of commission to determine whether a pattern of racketeering activity exists. The number of predicate acts, if more than one, is irrelevant. The question is the nature of the conduct under all of the circumstances.(fn10)
Where there is only one purpose, one result, one set of participants, one victim, and one method of commission, there is no continuity and, therefore, no pattern of racketeering activity.(fn12)
The court concluded that such was the case, although the alleged scheme involved a series of distinct transactions; therefore, the RICO claims were dismissed.
Other decisions likewise have imposed high barriers for RICO plaintiffs. For example, in one significant case, Garbade v. Great Divide Mining & Milling Co.,(fn13) Judge Kane thoroughly examined the status of the pattern element in district courts around the Tenth Circuit, and concluded that "acts . . . only directed toward a single fraudulent scheme . . . do not constitute a pattern of racketeering activity."(fn14) In a subsequent decision, Judge Kane suggested that "different criminal episodes" might satisfy the pattern requirement, but reached the same result.(fn15) In his most recent opinion, he reverted to the Garbade formulation, holding that misrepresentations in marketing a product to many purchasers did not constitute a pattern because all were part of a single scheme.(fn16)
Federal district judges in Colorado consistently have adopted a strict reading of the RICO pattern requirement. Most, if not all, require separate criminal schemes to establish a pattern. This is a potent obstacle to RICO claims, it sweeps so broadly that it may destroy many RICO claims that probably are valid (for example, a single ongoing scheme to defraud hundreds of similarly situated victims).
The Tenth Circuit, affirming Torwest,(fn17) did not take such a bold approach. Much like the Ninth Circuit Court in Schreiber Distributing Co. v. Serv-well Furniture Co.,(fn18) the panel did not venture far beyond the facts before it, holding that a
Examining the facts, the...scheme to achieve a single, discrete objective does not in and of itself create a threat of ongoing activity, even when the goal is pursued by multiple illegal acts, because the scheme ends when the purpose is accomplished.(fn19)
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