Cedric Kushner Promotions v. King

• Citation: 150 L.Ed.2d 198,121 S.Ct. 2087,533 U.S. 158
• Decision Date: 11 June 2001
• Docket Number: 00549
• Parties: CEDRIC KUSHNER PROMOTIONS, LTD., PETITIONER v. DON KING et al. SUPREME COURT OF THE UNITED STATES
• Court: United States Supreme Court

533 U.S. 158

121 S.Ct. 2087

150 L.Ed.2d 198

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press

CEDRIC KUSHNER PROMOTIONS, LTD., PETITIONER v DON KING et al.

SUPREME COURT OF THE UNITED STATES

No. 00-549

Argued April 18, 2001

Decided June 11, 2001

Syllabus

Petitioner, a corporate promoter of boxing matches, sued Don King, the president and sole shareholder of a rival corporation, alleging that King had conducted his corporation's affairs in violation of the Racketeer Influenced and Corrupt Organizations Act, which makes it "unlawful for any person employed by or associated with any enterprise ... to conduct or participate ... in the conduct of such enterprise's affairs through a pattern of racketeering activity," 18 U.S.C. 1962(c). The District Court, citing Circuit precedent, dismissed the complaint. In affirming, the Second Circuit expressed its view that 1962(c) applies only where a plaintiff shows the existence of two separate entities, a "person" and a distinct "enterprise," the affairs of which that "person" improperly conducts. In this instance, the court noted, it was undisputed that King was an employee of his corporation and also acting within the scope of his authority. Under the court's analysis, King, in a legal sense, was part of the corporation, not a "person," distinct from the "enterprise," who allegedly improperly conducted the "enterprise's affairs."

Held: In the circumstances of this case, 1962(c) requires no more than the formal legal distinction between "person" and "enterprise" (namely, incorporation); hence, the provision applies when a corporate employee unlawfully conducts the affairs of the corporation of which he is the sole owner-whether he conducts those affairs within the scope, or beyond the scope, of corporate authority. This Court does not quarrel with the basic principle that to establish liability under 1962(c) one must allege and prove the existence of two distinct entities: (1) a "person"; and (2) an "enterprise" that is not simply the same "person" referred to by a different name. Nonetheless, the Court disagrees with the appellate court's application of that "distinctness" principle to the present circumstances, in which a corporate employee, acting within the scope of his authority, allegedly conducts the corporation's affairs in a RICO-forbidden way. The corporate owner/employee, a natural person, is distinct from the corporation itself, a legally different entity with different rights and responsibilities due to its different legal status. The Court can find nothing in RICO that requires more "separateness" than that. Linguistically speaking, an employee who conducts his corporation's affairs through illegal acts comes within 1962(c)'s terms forbidding any "person" unlawfully to conduct an "enterprise," particularly when RICO explicitly defines "person" to include "any individual ... capable of holding a legal or beneficial interest in property," and defines "enterprise" to include a "corporation," 1961(3), (4). And, linguistically speaking, the employee and the corporation are different "persons," even where the employee is the corporation's sole owner. Incorporation's basic purpose is to create a legal entity distinct from those natural individuals who created the corporation, who own it, or whom it employs. See, e.g., United States v. Bestfoods, 524 U.S. 51, 61-62. The precedent on which the Second Circuit relied involved significantly different circumstances from those here at issue. Further, to apply RICO in these circumstances is consistent with the statute's basic purposes of protecting both a legitimate "enterprise" from those who would use unlawful acts to victimize it, United States v. Turkette, 452 U.S. 576, 591, and the public from those who would unlawfully use an "enterprise" (whether legitimate or illegitimate) as a "vehicle" through which unlawful activity is committed, National Organization for Women, Inc. v. Scheidler, 510 U.S. 249, 259. Conversely, the appellate court's critical legal distinction-between employees acting within and without the scope of corporate authority-would immunize from RICO liability many of those at whom this Court has said RICO directly aims, e.g., high-ranking individuals in an illegitimate criminal enterprise, who, seeking to further the enterprise's purposes, act within the scope of their authority, cf. Turkette, supra, at 581. Finally, nothing in the statute's history significantly favors an alternative interpretation. This Court's rule is no less consistent than is the lower court's rule with the following principles cited by King: (1) the principle that a corporation acts only through its directors, officers, and agents; (2) the principle that a corporation should not be liable for its employees' criminal acts where Congress so intends; and (3) antitrust law's intracorporate conspiracy doctrine. Pp. 2-8.

219 F.3d 115, reversed and remanded.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Breyer, J., delivered the opinion for a unanimous Court.

Opinion of the Court

Justice Breyer delivered the opinion of the Court.

The Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961 et seq., makes it "unlawful for any person employed by or associated with any enterprise ... to conduct or participate ... in the conduct of such enterprise's affairs" through the commission of two or more statutorily defined crimes-which RICO calls "a pattern of racketeering activity." 1962(c). The language suggests, and lower courts have held, that this provision fore- sees two separate entities, a "person" and a distinct "enterprise."

This case focuses upon a person who is the president and sole shareholder of a closely held corporation. The plaintiff claims that the president has conducted the corporation's affairs through the forbidden "pattern," though for present purposes it is conceded that, in doing so, he acted within the scope of his authority as the corporation's employee. In these circumstances, are there two entities, a "person" and a separate "enterprise"? Assuming, as we must given the posture of this case, that the allegations in the complaint are true, we conclude that the "person" and "enterprise" here are distinct and that the RICO provision applies.

Petitioner, Cedric Kushner Promotions, Ltd., is a corporation that promotes boxing matches. Petitioner sued Don King, the president and sole shareholder of Don King Productions, a corporation, claiming that King had conducted the boxing-related affairs of Don King Productions in part through a RICO "pattern," i.e., through the alleged commission of at least two instances of fraud and other RICO predicate crimes. The District Court, citing Court of Appeals precedent, dismissed the complaint. Civ. No. 98-6859, 1999 WL 771366, *3-4 (SDNY, Sept. 28, 1999). And the Court of Appeals affirmed that dismissal. 219 F.3d 115 (CA2 2000) (per curiam). In the appellate court's view, 1962(c) applies only where a plaintiff shows the existence of two separate entities, a "person" and a distinct "enterprise," the affairs of which that "person" improperly conducts. Id., at 116. In this instance, "it is undisputed that King was an employee" of the corporation Don King Productions and also "acting within the scope of his authority." Id., at 117. Under the Court of Appeals' analysis, King, in a legal sense, was part of, not separate from, the corporation. There was no "person," distinct from the "enterprise," who improperly conducted the "enterprise's affairs." And thus 1962(c) did not apply. Ibid.

Other Circuits, applying 1962(c) in roughly similar circumstances, have reached a contrary conclusion. See, e.g., Brannon v. Boatmen's First Nat. Bank of Okla., 153 F.3d 1144, 1148, n. 4 (CA10 1998); Richmond v. Nationwide Cassel L. P., 52 F.3d 640, 647 (CA7 1995); Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., 46 F.3d 258, 265, 269 (CA3 1995); Sever v. Alaska Pulp Corp., 978 F.2d 1529, 1534 (CA9 1992). We granted certiorari to resolve the conflict. We now agree with these Circuits and hold that the Second Circuit's interpretation of 1962(c) is erroneous.

We do not quarrel with the basic principle that to establish liability under 1962(c) one must allege and prove the existence of two distinct entities: (1) a "person"; and (2) an "enterprise" that is not simply the same "person" referred to by a different name. The statute's language, read as ordinary English, suggests that principle. The Act says that it applies to "person[s]" who are "employed by or associated with" the "enterprise." 1962(c). In ordinary English one speaks of employing, being employed by, or associating with others, not oneself. See Webster's Third New International Dictionary 132 (1993) (defining "associate"); id., at 743 (defining "employ"). In addition, the Act's purposes are consistent with that principle. Whether the Act seeks to prevent a person from victimizing, say, a small business, S. Rep. No. 91-617, p. 77 (1969), or to prevent a person from using a corporation for criminal purposes, National Organization for Women, Inc. v. Scheidler, 510 U.S. 249, 259 (1994), the person and the victim, or the person and the tool, are different entities, not the same.

The Acting Solicitor General reads 1962(c) "to require some distinctness between the RICO defendant and the RICO enterprise." Brief for United States as Amicus Curiae 11. And she says that this requirement is "legally sound and workable." Ibid. We agree with her assessment, particularly in light of the fact that 12 Courts of Appeals have interpreted the statute as embodying some such distinctness...