529 U.S. 494 (2000), 98-1480, Beck v. Prupis

Docket Nº:Case No. 98-1480
Citation:529 U.S. 494, 120 S.Ct. 1608, 146 L.Ed.2d 561, 68 U.S.L.W. 4320
Party Name:BECK v. PRUPIS et al.
Case Date:April 26, 2000
Court:United States Supreme Court
 
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Page 494

529 U.S. 494 (2000)

120 S.Ct. 1608, 146 L.Ed.2d 561, 68 U.S.L.W. 4320

BECK

v.

PRUPIS et al.

Case No. 98-1480

United States Supreme Court

April 26, 2000

Argued November 3, 1999

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

Syllabus

The Racketeer Influenced and Corrupt Organizations Act (RICO) creates a civil cause of action for "[a]ny person injured in his business or property by reason of a violation of section 1962." 18 U.S.C. § 1964(c). Subsection (d) of § 1962 forbids "any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of [§ 1962]." Petitioner is a former president, CEO, director, and shareholder of Southeastern Insurance Group (SIG). Respondents are former senior officers and directors of SIG who allegedly conspired to, and did, engage in acts of racketeering. Petitioner alleged that after he discovered respondents' unlawful conduct and contacted regulators, respondents orchestrated a scheme to remove him from the company. Petitioner sued respondents, asserting, among other things, a § 1964(c) cause of action for respondents' alleged conspiracy to violate §§ 1962(a), (b), and (c). Petitioner alleged that his injury was proximately caused by an overt act—namely, the termination of his employment—done in furtherance of respondents' conspiracy, and that § 1964(c) therefore provided a cause of action. The District Court dismissed his RICO conspiracy claim, agreeing with respondents that employees who are terminated for refusing to participate in RICO activities, or who threaten to report RICO activities, do not have standing to sue under RICO for damages from their loss of employment. In affirming, the Eleventh Circuit held that, because the overt act causing petitioner's injury was not an act of racketeering, it could not support a § 1964(c) cause of action.

Held:

Injury caused by an overt act that is not an act of racketeering or otherwise wrongful under RICO does not give rise to a cause of action under § 1964(c) for a violation of § 1962(d). To determine what it means to be "injured . . . by reason of" a "conspir[acy]," this Court must look to the common law of civil conspiracy. At common law, it was widely accepted that a plaintiff could bring suit for civil conspiracy only if he had been injured by an act that was itself tortious. When Congress adopted RICO, it incorporated this principle. As at common law, a civil conspiracy plaintiff cannot bring suit under RICO based on injury caused by any act in furtherance of a conspiracy that might have caused the plaintiff injury. Rather, such plaintiff must allege injury from an act that is analogous to an "ac[t] of a tortious character," see 4 Restatement

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(Second) of Torts, § 876, Comment b, meaning an act that is independently wrongful under RICO. The specific type of act that is analogous to an act of a tortious character may depend on the underlying substantive violation the defendant is alleged to have committed. Because respondents' alleged overt act in furtherance of their conspiracy was not an act of racketeering and is not independently wrongful under any substantive provision of the statute, petitioner does not have a cause of action under § 1964(c). Pp. 500-507.

162 F.3d 1090, affirmed.

Thomas, J., delivered the opinion of the Court, in which Rehnquist, C. J., and O'Connor, Scalia, Kennedy, Ginsburg, and Breyer, JJ., joined. Stevens, J., filed a dissenting opinion, in which Souter, J., joined, post, p. 507.

Jay Starkman argued the cause for petitioner. With him on the briefs were Jane W. Moscowitz and Joel S. Magolnick.

Michael M. Rosenbaum argued the cause for respondents. With him on the brief for respondents Bellezza et al. were Donald P. Jacobs and Richard M. DeAgazio. Frederick Mezey, pro se, filed a brief as respondent.[*]

Justice Thomas delivered the opinion of the Court.

The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968 (1994 ed. and Supp. IV), creates a civil cause of action for "[a]ny person injured in his business or property by reason of a violation of section 1962." 18 U.S.C. § 1964(c) (1994 ed., Supp. IV). Subsection (d) of § 1962 in turn provides that "[i]t shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of [§ 1962]." The question before us is whether a person injured by an overt act done in furtherance

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of a RICO conspiracy has a cause of action under § 1964(c), even if the overt act is not an act of racketeering. We conclude that such a person does not have a cause of action under § 1964(c).

I

A

Congress enacted RICO as Title IX of the Organized Crime Control Act of 1970, Pub. L. 91-452, 84 Stat. 922, for the purpose of "seek[ing] the eradication of organized crime in the United States," id., at 923. Congress found that "organized crime in the United States [had become] a highly sophisticated, diversified, and widespread activity that annually drain[ed] billions of dollars from America's economy by unlawful conduct and the illegal use of force, fraud, and corruption." Id., at 922. The result was to "weaken the stability of the Nation's economic system, harm innocent investors and competing organizations, interfere with free competition, seriously burden interstate and foreign commerce, threaten the domestic security, and undermine the general welfare of the Nation and its citizens." Id., at 923. Finding the existing "sanctions and remedies available to the Government [to be] unnecessarily limited in scope and impact," Congress resolved to address the problem of organized crime "by strengthening the legal tools in the evidence-gathering process, by establishing new penal prohibitions, and by providing enhanced sanctions and new remedies to deal with the unlawful activities of those engaged in organized crime." Ibid.

RICO attempts to accomplish these goals by providing severe criminal penalties for violations of § 1962, see § 1963, and also by means of a civil cause of action for any person "injured in his business or property by reason of a violation of section 1962," 18 U.S.C. § 1964(c) (1994 ed., Supp. IV).[1]

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Section 1962, in turn, consists of four subsections: Subsection(a) makes it "unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt . . . to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce";[2] subsection (b) makes it "unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce"; subsection (c) makes it "unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt"; and, finally, subsection (d) makes it unlawful "for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section."

B

Petitioner, Robert A. Beck II, is a former president, CEO, director, and shareholder of Southeastern Insurance Group (SIG).[3] Respondents, Ronald M. Prupis, Leonard Bellezza,

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William Paulus, Jr., Ernest S. Sabato, Harry Olstein, Frederick C. Mezey, and Joseph S. Littenberg, are former senior officers and directors of SIG. Until 1990, when it declared bankruptcy, SIG was a Florida insurance holding company with three operating subsidiaries, each of which was engaged in the business of writing surety bonds for construction contractors.

Beginning in or around 1987, certain directors and officers of SIG, including respondents, began engaging in acts of racketeering. They created an entity called Construction Performance Corporation, which demanded fees from contractors in exchange for qualifying them for SIG surety bonds. Respondents also diverted corporate funds to personal uses and submitted false financial statements to regulators, shareholders, and creditors. During most of the time he was employed at SIG, petitioner was unaware of these activities. In early 1988, however, petitioner discovered respondents' unlawful conduct and contacted regulators concerning the financial statements. Respondents then orchestrated a scheme to remove petitioner from the company. They hired an insurance consultant to write a false report suggesting that petitioner had failed to perform his material duties. The day after this report was presented to the SIG board of directors, the board fired petitioner, relying on a clause in his contract providing for termination in the event of an "inability or substantial failure to perform [his] material duties." App. 104. Petitioner sued respondents, asserting, among other things, a civil cause of action under § 1964(c).[4] In particular, petitioner claimed that respondents used or invested income derived from a pattern of racketeering activity to establish and operate an enterprise, in violation of § 1962(a); acquired and maintained an interest in

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and control of their enterprise through a pattern of racketeering activity, in violation of § 1962(b); engaged in the conduct of the enterprise's affairs through a pattern of racketeering activity, in violation...

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