RICO - the rejection of an economic motive requirement.

• Author: Randolph, Jennifer G.
• Position: Supreme Court Review - Case Note

1. INTRODUCTION

   In NOW v. Scheidler,(1) the United States Supreme Court held that the Racketeer Influenced and Corrupt Organizations Act (RICO), which outlaws certain racketeering activity by or in relation to an enterprise, does not require that the enterprise or the racketeering activity be economically motivated.(2) The National Organization For Women (NOW) and two health clinics that perform abortions brought suit against anti-abortion activists and organizations under RICO for "conspir[ing] to shut down abortion clinics through a pattern of racketeering activity."(3) Based on statutory interpretation and legislative history, Chief Justice Rehnquist, writing for the majority, concluded that the unambiguous language of RICO did not require a defendant to have an economic motive, and therefore a RICO suit could be brought against abortion protesters who were morally and religiously motivated.(4)

   This Note argues that the majority, although it arrived at the correct resolution, employed inadequate statutory analysis to arrive at its holding. The term "enterprise" as used in the statute is ambiguous; consequently, the Court should have looked for the ordinary meaning of the term "enterprise" to determine the plain meaning of the statute. The Court was correct, however, not to judicially impose restrictions onto the broad language of RICO based on the legislative history of the statute, because the legislative history does not show a strong Congressional intent to require an economic motive under RICO. In addition, this Note analyzes Justice Souter's treatment of the First Amendment implications of the majority's decision and suggests future applications of RICO.

2. BACKGROUND

   In 1970, Congress enacted the Organized Crime Control Act (OCCA).(5) Chapter 96 of the OCCA [sections][sections] 1961-68, entitled Racketeer Influenced and Corrupt Organizations (RICO), makes certain racketeering activities and conspiracy to commit these racketeering activities unlawful.(6) These racketeering activities are defined in detail in [sections] 1961(1) of RICO,(7) and are often referred to as RICO predicate acts or predicate offenses. To successfully allege a RICO offense, it is also necessary to prove the existence of an enterprise as described in [sections] 1961(4).(8)

   Although Congress originally enacted OCCA, including RICO, to "seek the eradication of organized crime in the United States,"(9) the language of RICO is broad and not specifically limited to organized crime.(10) Over the years, courts have attempted to interpret the meaning of these general terms to determine the appropriate scope of RICO.

   1. THE HISTORICALLY BROAD INTERPRETATION OF RICO

      For years, the United States Supreme Court has given RICO a broad reading.(11) For example, the Court in United States v. Turkette(12) refused to limit the scope of RICO to legitimate enterprises, holding that the general language of [sections] 1961(4)'s description of enterprise "include[s] both legitimate and illegitimate enterprises within its scope."(13) The defendant in this case was an alleged member of an illegitimate enterprise involved in drug trafficking, arson, insurance fraud, bribery, attempted bribery of police officers, and corruption of the judicial system.(14) The Court rejected the defendant's argument "that RICO was intended solely to protect legitimate business enterprises from infiltration by racketeers and that RICO does not make criminal the participation in an association which performs only illegal acts and which has not infiltrated or attempted to infiltrate a legitimate enterprise."(15)

      Instead, the Court interpreted the term "enterprise" broadly. The Court reasoned that, if Congress had intended enterprise to include only legitimate enterprises, it "could easily have ... insert[ed] a single word, 'legitimate.'"(16) Although the Court in Turkette was not expressly addressing whether RICO requires that the enterprise have an economic motive, the Court defined enterprise as "an entity,... a group of persons associated together for a common purpose of engaging in a course of conduct,"(17) which does not require an economic motive. Thus, the Court established precedent for a liberal reading of RICO, and specifically the term "enterprise."

      In a series of decisions following its broad interpretation of RICO in Turkette, the Supreme Court, as well as the Seventh Circuit, continued to refuse to judicially legislate restrictions into RICO. Both courts repeatedly held that RICO was an unambiguous Act and that Congress purposefully employed broad language, that courts should not construe narrowly.(18) First, in the 1984 case Haroco, Inc. v. American National Bank and Trust Co. of Chicago,(19) the United States Court of Appeals for the Seventh Circuit refused to limit the applications of RICO when it rejected special standing and injury requirements for civil RICO plaintiffs.(20) The defendants were a bank that made loans to the plaintiff corporations, the officer and director of the bank, and the parent company of the bank.(21) Plaintiffs alleged that defendants used "the mails in furtherance of the alleged scheme to defraud plaintiffs by overstating the prime interest rate."(22) Such a fact pattern is not typical of the organized crime that Congress sought to eradicate through RICO, and "it does not seem at all likely that Congress anticipated the application of civil RICO to improperly calculated interest charges by a commercial bank."(23) Yet, the court concluded that it would not exclude the defendants' conduct from the reach of RICO. The court found that since "Congress deliberately chose to employ broad terms which would defy judicial confinement ... it does not seem fitting for [the court] to attempt to narrow the statute in ways which are nearly impossible to rationalize merely to exclude subjects of this kind."(24) The court further explained that, "the fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth."(25)

      Shortly after Haroco, the Supreme Court rejected a special standing requirement for civil RICO plaintiffs in Sedima, S.P.R.L. v. Imrex Co., Inc.(26) The fact pattern in Sedima also did not involve organized crime. The dispute arose when a joint international venture between the Belgian company, Sedima, and the New York company, Imrex, went awry.(27) Sedima alleged that Imrex committed "violations of [sections] 1962(c), based on ... mail and wire fraud"(28) when Imrex "present[ed] inflated bills, cheating Sedima out of a portion of its proceeds by collecting for nonexistent expenses."(29) The Court rejected the Second Circuit's amorphous "organized crime" standing requirement that demanded a RICO plaintiff to "allege a 'racketeering injury'--an injury 'different in kind from that occurring as a result of the predicate acts themselves, or not simply caused by the predicate acts, but also caused by an activity which RICO was designed to deter.'"(30) The Court concluded that courts should not narrow RICO in this way, but instead should construe it broadly for two reasons.(31) First, because Congress purposely left the language in RICO broad;(32) and second, because Congress expressly stated that RICO was to "be liberally construed."(33) In addition, the Court agreed with the Seventh Circuit that "the fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity[,] [but] demonstrates breadth."(34)

      Finally, in H.J. Inc. v. Northwestern Bell Telephone Co.,(35) the Supreme Court made an express decision not to limit RICO strictly to organized crime.(36) In that case, customers of Northwestern Bell Telephone Company filed a class action against "some of the telephone company's officers and employees, various members of the Minnesota Public Utilities Commission (MPUC), and other unnamed individuals and corporations."(37) The telephone customers alleged violations of RICO based on factual allegations that Northwestern Bell bribed and illegally influenced the MPUC to "approve rates for the company in excess of a fair and reasonable amount."(38) The Court rejected a narrow reading of the phrase "pattern of racketeering activity," holding that it does not require proof of "multiple illegal schemes"(39) or that the predicate acts be "indicative of an organized crime perpetrator."(40) Instead, the Court settled on a broad meaning for "pattern of racketeering" that requires a "plaintiff or prosecutor [merely to] prove [a] continuity of racketeering activity, or its threat, simpliciter."(41) The Court referred to the legislative history of OCCA in support of this broad interpretation.(42) The Court also considered the fact that, in other sections of OCCA and in other statutes, Congress "enact[ed] explicit limitations to organized crime"(43) and could have easily done the same in RICO, but chose not to do so.(44) Further, the Supreme Court stressed that it is not the job of the courts to judicially legislate restrictions into RICO.(45)

   2. THE SPLIT AMONG THE CIRCUITS

      Despite these decisions establishing a trend of liberal RICO interpretation, a split developed among the courts of appeals on the issue of whether RICO requires "the racketeering enterprise or the predicate acts of racketeering [to be] motivated by an economic purpose."(46) Both the Second Circuit and the Eighth Circuit maintained that an economic motive requirement exists in RICO. In contrast, the Third Circuit held that RICO does not require an economic motive.

      1. Second Circuit

         The Second Circuit first established the economic motive requirement in United States v. Ivic.(47) The defendants in Ivic were Croatian terrorists convicted of "conspir[ing] to kill or otherwise injure" the Secretary General of the Croatian National Congress,(48) attempting to bomb several locations, and "conspir[ing] to transport and utilize explosives."(49) These acts...