492 U.S. 229 (1989), 87-1252, H.J. Inc. v. Northwestern Bell Telephone Co.

Docket Nº:No. 87-1252.
Citation:492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195, 57 U.S.L.W. 4951
Party Name:H.J. Inc. v. Northwestern Bell Telephone Co.
Case Date:June 26, 1989
Court:United States Supreme Court
 
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492 U.S. 229 (1989)

109 S.Ct. 2893, 106 L.Ed.2d 195, 57 U.S.L.W. 4951

H.J. Inc.

v.

Northwestern Bell Telephone Co.

No. 87-1252.

United States Supreme Court

June 26, 1989

Argued November 8, 1988

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE EIGHTH CIRCUIT

Syllabus

The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, which is Title IX of the Organized Crime Control Act of 1970 (OCCA), imposes criminal and civil liability upon persons who engage in certain "prohibited activities," each of which is defined to include, as a necessary element, proof of a "pattern of racketeering activity," § 1962. "Racketeering activity" means "any act or threat involving" specified state law crimes, any "act" indictable under specified federal statutes, and certain federal "offenses." § 1961(1). A "pattern" requires "at least two acts of racketeering activity" within a 10-year period. § 1961(5). Petitioners, customers of respondent Northwestern Bell, filed a civil action in the District Court against Northwestern Bell and other respondents, including members of the Minnesota Public Utilities Commission (MPUC) -- which is responsible for determining Northwestern Bell's rates -- seeking an injunction and treble damages. They raised four separate claims under §§ 1962(a), (b), (c), and (d), based on factual allegations that, between 1980 and 1986, Northwestern Bell made various cash and in-kind payments to MPUC members, and thereby influenced them to approve rates for the company in excess of a fair and reasonable amount. The District Court dismissed the complaint, under Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief could be granted, on the ground that each of the fraudulent acts alleged was "committed in furtherance of a single scheme to influence MPUC commissioners," rather than multiple illegal schemes. The Court of Appeals affirmed, confirming that under its precedent, a single scheme is insufficient to establish a pattern of racketeering activity.

Held:

1. In order to prove a pattern of racketeering activity, a plaintiff or prosecutor must show at least two racketeering predicates [109 S.Ct. 2896] that are related and that amount to, or threaten the likelihood of, continued criminal activity. Proof of neither relationship nor continuity requires a showing that the racketeering predicates were committed in furtherance of multiple criminal schemes. Pp. 236-249.

(a) Section 1961(5) states that at least two racketeering predicates committed within a 10-year period are necessary to establish a RICO

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pattern, but implies that two acts may not be sufficient. Section 1961(5) thus assumes that there is something to a pattern beyond merely the number of predicates involved. In normal usage, the word "pattern" would also be taken to require not simply a multiplicity of predicates, but rather predicates arranged or ordered by reason of the relationship they bear to each other or to some external organizing principle. The text of RICO fails to identify the forms of relationship or external principles to be used to determine whether predicates fall into a pattern. RICO's legislative history, however, establishes that Congress intended that to prove a "pattern of racketeering activity," a plaintiff or prosecutor must show both "relationship" and "continuity" -- that the racketeering predicates are related, and that they either constitute or threaten long-term criminal activity. Pp. 237-239.

(b) Relationship and continuity are two distinct requirements, though their proof will often overlap. RICO's notion of relationship is no more constrained than that used in Title X of OCCA, under which

criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.

18 U.S.C. § 3575(e). Continuity of racketeering activity likewise may be demonstrated in a variety of ways. Continuity is centrally a temporal concept, and may be either closed- or open-ended. A party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. Otherwise, it must be shown that the predicates establish a threat of long-term racketeering activity -- for example, because the predicates themselves involve a distinct threat of such activity; because they are part of the regular way of doing business for an ongoing entity such as a criminal association or legitimate business; or because they are a regular means of conducting or participating in an ongoing RICO enterprise. Although proof of multiple criminal schemes may be relevant to this inquiry into continuity, it is not the only way to show continuity. Adopting the Court of Appeals' multiple scheme test would bring a rigidity to the methods of proving a pattern not present in the idea of "continuity" itself, and it would introduce a concept -- the "scheme" -- that does not appear in RICO's language or legislative history. Pp. 239-243.

(c) Neither RICO's language nor its legislative.history supports a rule that a defendant's racketeering activities form a pattern only if they are characteristic of organized crime. No such restriction appears in RICO's text. Nor is there any language suggesting that RICO's scope should be limited to acts of an association, rather than an individual acting alone. Moreover, Congress' approach in RICO can be contrasted with

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its decision to enact explicit limitations to organized crime in other statutes. E.g., Omnibus Crime Control and Safe Streets Act of 1968, § 601(b). The argument that RICO's broad language should be read restrictively to be congruous with RICO's purpose to eradicate organized crime is rejected: the legislative history shows Congress had no such restriction in mind. Pp. 243-249.

2. The Court of Appeals erred in affirming the District Court's dismissal of petitioners' complaint for failure to allege facts sufficient to demonstrate a "pattern of racketeering activity." Consistent with the allegations in their complaint, petitioners may be able to prove that the multiple predicates alleged satisfy the requirements of continuity and relationship, and hence [109 S.Ct. 2897] satisfy RICO's pattern of racketeering element. Pp. 249-250.

829 F.2d 648, reversed and remanded.

BRENNAN, J., delivered the opinion of the Court, in which WHITE, MARSHALL, BLACKMUN, and STEVENS, JJ., joined. SCALIA, J., filed an opinion concurring in the judgment, in which REHNQUIST, C.J., and O'CONNOR and KENNEDY, JJ., joined, post, p. 251.

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BRENNAN, J., lead opinion

JUSTICE BRENNAN delivered the opinion of the Court.

The Racketeer Influenced and Corrupt Organizations Act (RICO or Act), Pub.L. 91-452, Title IX, 84 Stat. 941, as amended, 18 U.S.C. §§ 1961-1968 (1982 ed. and Supp. V), imposes criminal and civil liability upon those who engage in certain "prohibited activities." Each prohibited activity is defined in 18 U.S.C. § 1962 to include, as one necessary element, proof either of "a pattern of racketeering activity" or of "collection of an unlawful debt." "Racketeering activity" is defined in RICO to mean "any act or threat involving" specified state law crimes, any "act" indictable under various specified federal statutes, and certain federal "offenses," 18 U.S.C. § 1961(1) (1982 ed., Supp. V); but of the term "pattern," the statute says only that it "requires at least two acts of racketeering activity" within a 10-year period, 18 U.S.C. § 1961(5). We are called upon in this civil case to consider what conduct meets RICO's pattern requirement.

I

RICO renders criminally and civilly liable "any person" who uses or invests income derived "from a pattern of racketeering activity" to acquire an interest in or to operate an enterprise engaged in interstate commerce, § 1962(a); who acquires or maintains an interest in or control of such an enterprise "through a pattern of racketeering activity," § 1962(b); who, being employed by or associated with such an enterprise, conducts or participates in the conduct of its affairs

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"through a pattern of racketeering activity," § 1962(c); or, finally, who conspires to violate the first three subsections of § 1962, § 1962(d). RICO provides for drastic remedies: conviction for a violation of RICO carries severe criminal penalties and forfeiture of illegal proceeds, 18 U.S.C. § 1963 (1982 ed., Supp. V); and a person found in a private civil action to have violated RICO is liable for treble damages, costs, and attorney's fees, 18 U.S.C. § 1964(c).

Petitioners, customers of respondent Northwestern Bell Telephone Co., filed this putative class action in 1986 in the District Court for the District of Minnesota. Petitioners alleged violations of §§ 1962(a), (b), (c), and (d) by Northwestern Bell and the other respondents -- some of the telephone company's officers and employees, various members of the Minnesota Public Utilities Commission (MPUC), and other unnamed individuals and corporations -- and sought an injunction and treble damages under RICO's civil liability provisions, §§ 1964(a) and (c).

The MPUC is the state body responsible for determining the rates that Northwestern Bell may charge. Petitioners' five-count complaint alleged that, between 1980 and 1986, Northwestern Bell sought to influence members of the MPUC in the performance of their duties -- and in fact caused them to approve rates for the company in excess of a fair and reasonable amount -- by making cash payments to commissioners, negotiating with them regarding future employment, and...

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