my clients are appealing from a dismissal of their claims for violation of civil rico subsection c and d without leave to a man and a subsection seen makes it unlawful for persons associated with an enterprise to conduct or participate microsoft invest five to promote each other products and to jointly market the imus and service this joint venture was described as a comprehensive strategic alliance with microsoft investing two hundred million dollars to invest five percent to the terms of the is a combination of two companies that are combining to carry out a complex series of business activities together you're going way beyond pleading again that's not a question of what you might be able to let it change but we're here on twelve that is the heart of the deep conspiracy because the conspiracy would be the agreement to commit unlawful acts and in this case the agreement is it has nothing inherently sinister about it it's an agreement of two companies to engage in a range of commercial activity what you allege and thirty four that it is the agreement that is furthered by activities under nine hundred sixty one and that's to me every conspiracy out enterprise well another way to think of this is if you put yourself in the shoes of the pleading party and you sit down and you read rico and you look at the definition of enterprise what does it say it says that an enterprise includes a corporation and a partnership as well as an association in fact inter caste the supreme court said enterprise together such that they're carrying out some economic activity in turkey that the supreme court was looking for a group of persons engaged together for a common course a common purpose of engaging in a course of conduct so if the individual actors are valid together in some way to engage in a common course of conduct then they are now under price and to respond to the concern that there is something improper about saying that every go to congress because it says enterprise including any individual partnership corporation i mean there it is it's understandable that's precisely what i'm saying i don't know if there's miscommunication might my argument is exactly that that it's right in the statute and  it wouldn't accurately describe what happened here because the enterprises the developer ations coming together to carry out the actually they can be right that is to say anytime you have a corporation involved with somebody else that that necessarily is an enterprise  i think maybe overrule certainly take a serious departure from chang and simply agree with the seventh circuit and rogers and abs read to you from rogers and the other side may want to respond to this finally th a rico enterprise since simply because you had a corporation involved and the discussion in chang is george realty there's nothing said about this corporation there's no allegations that describe how this corporation is part of some enterprise that affects interstate commerce in any way and spin the absence of any allegation and given the fact that the activities of that enterprise were directed by this couple to gab rich as they're called in the case but they had no control over the corporation and you couldn't hold that corporation as part of the enterprise because if you're looking at what the statute intends to prohibit which is the operation of some business in a racketeering way ways in the process and so the court in china is saying there's just nothing in here about how this corporation is part of any enterprise it's just out there there is no discussion of it and where i think things go off track is best part of that case which is called naturists direct and i think that's where things go off track in my view and specifically i don't think the holding in mistresses is anything that needs to be revisited seems to get some traction in the case law because it's quoted with approval even though it's not part of the ninth circuit's opinion are you arguing counsel of those cases are that variance with her  cat let me answer that because that's really the ultimate question i think that to the extent that the case law is interpreted as creating a requirement that a plaintiff pleader rico enterprise that involves one structure of actors doing illegal things and another substructure of actors doing illegal things that that's wrong because there are several ways you can tell it's wrong first of all is it would exclude a wholly illegitimate enterprise which is the exact opposite of s i don't think that's what the quantum venture is not mentioned in your pleading you're correct there the case law that if you look at a case like river city markets case for example the ninth circuit up held what was there simply a combination of two i can't answer that question off the top of my head i mean i can attest that that's what you said that's your allegation of an enterprise design agreement and activities in furtherance of agreements that well i think to answer that question directly yes i think that's right  broker and seller of some supermarkets that came together there was no formal agreement to conduct business together like there was in this case i think i think the difficulty is you're trying to say it's a states versus rico bending decision from the third circuit that was decided relatively shortly after kirk it approves the three part test set out in that case which looks for a structure to make decisions of continuity rather than hoc decision making and then proof of an enterprise that's distinct from the pattern of racketeering activity if you look at what's happening here you have two companies coming together they had a formal steering committee we now know we  when we filed the complaint but they had a formal mechanism for making decisions together they were carrying out this necessity video over a period of years and  to be an enterprise and if it's not i would submit that the problem is with the test and not with with that it's not a reliable indicator because if this isn't an enterprise i don't this was clearly combination of companies that entities well i guess i think may well it may well be that every contract is next lives and then there's that out there on the other hand that doesn't seem to make a great deal of sense simply to carry out some single piece of business that what they're contemplating is economic activity that involves a close interrelationship between the two companies that requires some decision in the chang case i think that it does you have to look at it isn't it are these people coming together to carry out economic activity that qualifies in any meaningful sense as another prize if they're selling cars in san francisco and they have some joint decision making process or hierarchical decision making process and there's continuity and it's separate from the pattern of racketeering activity if that doesn't qualify then we have to throw away chang we've got to go  the relationship between well i think what's what's wrong here is that there's a test being applied that the district courts think can be used to throw a case out of the pleading stage that that is n is apparently the district court believed you had to have a legal subgroup and illegal set group in order to have an enterprise and cattle are incorrect threatenings it's reversible  that point i agree with out there is one other concern which is that there's a stock or at pleading element that this the court believes applies which is this racketeering distribution of proceeds element which is distinct from the separate substructures element and that also appears in this naturist direct case in the same quotation i was reading from earlier and this is a an embellishment that has cropped up that the district court refers its opinion where it says that you have to plead that the distribution of the racketeering proceeds is happening in some way beyond normal business practice and if it is just normal business practice then that's not good enough and you don't qualify as an enterprise and that that is also i expect that not a permissible pleading requirement under the enterprise definition because there's no reason why you would think that would be needed if you would exclude a single corporation that's being operated in a wholly illegal way from the definition of an enterprise since it wouldn't necessarily distribute its proceeds in a in a wrongful way so i think both the separate substructures pleading requirement and the i call it the racketeering distribution of procedure requirement are improper sort of side close on the law that need to be prudent back because they don't comport with the decision a lot of the supreme court and other decisions of the circuit and i think they lead to the result that to exclude illegitimate enterprises and you come up with a other hypotheticals where the test for an association in fact enterprise leads you to put out from the definition of enterprises combinations of people or corporations that are clearly intended to be encompassed within the definition of an  of time in case there are issues specific to best five for mr block to address at the end of my comments and i propose to take the rest of this committee should turn on the proposition that organizations organizations that have their own decision making structures that direct the affairs of an enterprise i think what we're talking about the definition of the term at a price that's all this was dismissed of the theory that this is not an therefore needed to be dismissed that was only one of them and i do not defend that rationale if we other rationales leeward saluda if we were to adopt the seven circuits opinion and rogers as an appropriate understanding of enterprise in fact and of trick at would you win or would you lose i don't think rogers was cited i do i do have some familiar ninety six directly on point no i have a circuit and i have some familiarity with it i think it did have the structure of term in it as well that as i recall and i think your question your honor  mr girard focused on goals apart from the criminal enterprise and that not being a requirement rogers i agree with that and but i think the essence of this is what does it mean after church as to have an entity an associated association in fact enterprise and the concepts that i articulated at the start of the argument concepts apply in space or you have two ongoing legal entities who have come together in a mutual purpose where they usually according to the even the allegation was with reason agreement which may be a conspiracy as well but there's an agreement between these two entities that have agreed to carry out a program which is another must describe the program was described separately one through basically misrepresents to consumers allegations of this complaint the complaint alleges the enterprise in paragraph thirty four without any ambiguity as an agreement and acts in association with that agreement to define and describe what it means post gas to be an entity what it means to say what is it that caused congress to enact this racketeering statute impose all kinds of extra penalties and how do we separate that from any run of the mill agreement any run of the mill tort involving more than one entity or involving any corporate entity ho enterprise for now everything else is an enterprise every individual every corporation we don't read into that all these other requirements well i mean there must be places in the statue where you can accomplish your purpose of seeing that you have the kind of evil activities or motives or whatever you want but we're talking about one of the enterprises congress covered everything in the world well i think actually enterprise is the right place and the chain was right about that and the reason i think enterprise is the right place is it's one thing to say a corporation can be an enterprise because a corporation has its decision making structure in place and so does so does an individual and individual structures or her own pursuit of foot when you start getting into associations in fact but the question is what is it about an association in fact that makes to object to the sort of thing injures that congress was concerned about when it crafted this requirement and centered the statute on the phrase enterprise account so we have the turkana case which has been mentioned on both sides quite frequently so far and the very last paragraph of opinions the language of the statute reveals that congress opted for a far broader definition of the word enterprise and were unconvinced by anything of legislative history the definition should be given  lawyers would be able to allege an enterprise out of those circumstances but i think ultimately our collective job is what is the complaint said what are the what are the allegations how would you characterize the relationship between these two cli and the complaint alleges not asking about the complaint i want you to tell the end bank or what it is in your view they have an agreement it's a joint marketing agreement is that how would you think i haven't done maybe a fair characterization of if they have an agreement where they're going to do certain marketing together and that's in fact in other words it's not a legal entity but it's an association in fact no i think it's an agreement on what structure to have an agreement because you've all you said is we agree you know all decisions are made jointly what happens if there isn't an agreement well i thought it hypothetically that because we're talking about about pleading if if the joint venture had been used in paragraph thirty four and it alleges the joint venture has of structure and that would be enough to satisfy the pleading requirements when she agree with the latter part if it alleged structural along the lines that we haven't removed mr schaeffer without meaning to cast aspersions on either of these two quickly help companies how is this any different from what congress was thinking when an active rico in dealing question and the real essence of what congress was thinking was when we see things that are organized that's what the statute was above when we see things that are organized that have a structure that divide up the proceeds that have an extra danger that goes beyond mere agreements that goes beyond mere individual criminal conduct and that's why we want to have a statute but it has trouble what's different from the structure between the illegal crime about how the decisions are made the structure of those decisions the enforcement of those decisions against members of the broken legs it's a it would be very easy to allege that and that's what's different between the allegations that we can all which is a structure and then you look to the pattern of activity and the pattern of activity is that between these two entities they have agreed to utilize their software and their marketing and the the allegation whether it's true or to fraud customers into unwittingly winding up getting stuck in a relationship with microsoft where the burden then shifts to the customer to bail  out now that's that's the activity now if you think that's not breaking legs and whatever and if you wind up tacking it on background on the merits but in terms of alleging what's tricky it seems to want is there's a separate assuming they had alleged that the the structure has to do the enterprise that the conduct has to be through the enterprise the enterprise has to be what's directing that activity and that's what's missing from the allegations among other things from the allegations of this complaint there is the paragraph ten that talks about the joint marketing agreement it's you know an interesting set of allegations but when they describe what the enterprise is in paragraph thirty four they talk about an agreement and activities i if you know with no discovery they're supposed to know us with the details of dispute resolution so they're supposed to be this is according to their complaint a two hundred million dollar  essence of what congress was concerned about with rico was this continuing organization that is more dangerous than just people are for the the problem i am having is that the structure that is alleged is an ongoing operating business relationship between two companies who are there for factually have the continuity and have as corporate entities have their own internal structures they marry the two operations which are to beat in the them closely they're actually separate from the allegations of the enterprise and they're also separate from the allegations of what actually occurred at best buy when people were signed up for the m s n service of the enterprise conducting the activities through the affairs of the enterprise so to me those those two aspects are our joint credit and your argument why do you think that a memo would be futile case well a couple of reasons first they did already amend this complaint but the procedural history as it was first filed here in san francisco we filed a form on convenience motion and also a motion dismiss the court in san francisco granted our for my convenience motion part of the other motion to the seattle they then amended with our agreement they amended their complaint the amendments included a lot in fact the bulk of the allegations that we're now talking about as the few allegations they have that that might satisfy the enterprise requirement so they've they've had a shot to win that and after amendment th addressed that question in the answer in the panel argument and i think there can probably be different interpretations of the end of the answer which is we cannot always that at this point but whatever interpretation is there is is words at the end of the answer the fact is the judge said what further structure chan you offer and there is nothing provided and the notion that we now come finally to have  joining together on our own and then here's some additional material as that is that ought to be the way to run the railroad that obviously it's in your discretion as to whether or not to do that but to me so frustrating that is a fu you not amend and if you focus that that way and you look at the questions and answers in the district court there isn't anything you want you keep coming back to and i can understand very well why you do that to the point that if enterprise is not much of an obstacle then what's to stop this statute from being overly broad well various courts have been sympathetic in only twice the supreme court and i think by just a voice says that's exactly what they said and that's exactly what they meant as far as we can tell if they want to change the statute they can do it it seems to me that you your clients are protected not very much by the word  the statute the details that the court put on that that this court went on that in changed those all have meaning there is reason for them to have meaning other courts other circuits they don't have there's there's an agreement there's an ongoing agreement exactly what the ongoing association is and whether it has any structure to it any entity quality to it was never in the structure of any including and i appreciate your addressing that the proceeds going to what chang said about that was that the enterprise ought to have a structure related to that directed the distribution of the proceeds and any which essentially divided up pursuant i assume to the terms of the joint venture agreement business and final back to best buy and microsoft through the sale of their goods and services with  the question raised by the plaintiffs inec ace well aren't you going beyond a day and nine b through all these standing orders that require us to allege a whole lot more than we think a day and nine ve of the federal civil procedure require and the courts that yes you're right those standing orders are not correct we shouldn't require people to stick to them but chang is still good under eight and nine b was affectively the holding chain gets applied and the complaint gets tossed and so i'm not asking for any i don't believe any heightened pleading requirement all i'm asking for is something beyond the most fair and legal conclusions of what constitutes the alleged enterprise and in this case there really aren't even legal conclusions about the alleged enterprise the only legal conclusion agreements and acts in furtherance of the agreement on their face do not constitute of directives to do at the pleading stage and you drop all inferences in favor of the pleading party i think it's fairly read to say that what you have is an agreement bringing two companies together and activity being carried out pursuant to that agreement that that would satisfy the definition of an association in fact to the extent that i referred in my argument to a joint venture a partnership i hope i didn't pull us astray there because i think what i was trying to do is to demonstrate that because the statute sets out specific definitions of things that can be enterprises like corporations and partnerships that if you apply the association in fact tests that the district court applied here you would end up drawn in favor of the pleading party i think this alleged enterprise satisfies the test set out and shining work i submit that things go astray and i don't think it's intended in the opinion itself but i think it's the quotation in this mattress court you have a view on whether we should overrule the thing i do i think that personally reading the case law having spent the time on it i think that obviously the courts are struggling for some kind of gate keeping device here and i don't think it's the enterprise requirement i think that the fact that congress has defined it so broadly and i think the direction the court house from turkey is that the enterprise requirement should be read that there's a seven circuit case called it's