United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 98-2442

___________

Vickie Fogie, Joan Leonard, and *

Angela Adams, on behalf of themselves *

and all others similarly situated; *

*

Plaintiffs - Appellees, *

*

v. * Appeals from the United States

* District Court for the

THORN Americas, Inc., * District of Minnesota.

*

Defendant - Appellant, *

*

THORN EMI North America *

Holdings, Inc., a Delaware *

corporation, *

*

Defendant - Appellant. *

_____________

No. 98-2447

_____________

Vickie Fogie, Joan Leonard, and *

Angela Adams, on behalf of themselves *

and all others similarly situated; *

*

Plaintiffs - Appellants, *

*

v. *

*
1THORN Americas, Inc. is a wholly owned subsidiary of THORN EMI, Inc.,

which is a wholly owned subsidiary of TEMINAH, the ultimate North American parent

company. TEMINAH, in turn, is a wholly owned subsidiary of THORN EMI, plc, a

British conglomerate that owns and operates businesses worldwide. The plaintiffs

originally sued additional related companies such as THORN EMI (USA) Holdings,

Inc., but these companies subsequently merged into THORN Americas or TEMINAH,

thereby ceasing to have a separate corporate existence.

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THORN Americas, Inc., formerly *

known as Rent-A-Center, Inc., *

*

Defendant - Appellee, *

*

THORN EMI North America *

Holdings, Inc., A Delaware *

corporation, *

*

Defendant - Appellee. *

___________

Submitted: May 10, 1999

Filed: August 20, 1999

___________

Before RICHARD S. ARNOLD, JOHN R. GIBSON, and BOWMAN, Circuit Judges.

___________

BOWMAN, Circuit Judge.

Vickie Fogie, Joan Leonard, and Angela Adams filed a class-action lawsuit

against THORN Americas, Inc. and its parent companies, including THORN EMI

North America Holdings, Inc. (TEMINAH),1 alleging the companies had violated

Minnesota and federal law while operating a rent-to-own business. The District Court

entered judgment for the plaintiff class on its claim that THORN Americas and

TEMINAH committed usury in violation of Minnesota law by charging excessive
2This opinion, like our earlier opinion, uses RAC to refer collectively to THORN

Americas and its parent companies, including appellant TEMINAH. We also capitalize

"THORN," even when citing to other opinions, to reflect THORN's own practice.

-3-

interest rates on credit sales of consumer goods. The plaintiffs recovered

approximately $30 million in damages on their usury claim, and the District Court

dismissed their other claims. THORN Americas and TEMINAH appeal several aspects

of the District Court's damage award on the usury claim. The plaintiffs cross-appeal,

claiming the District Court erred when it dismissed their claims that the defendants

violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.

§§ 1961-1968 (1994).

I.

As described in this Court's previous opinion, Fogie v. THORN Americas, Inc.,

95 F.3d 645 (8th Cir. 1996), appellant THORN Americas operates stores called RentA-Centers (RAC)2

 that offer household goods, including furniture and appliances, for

sale or lease. Customers choosing to lease goods enter rent-to-own agreements with

RAC. Under the agreements, customers pay a portion of the goods' purchase price plus

interest and take possession of the goods for an initial period of a week or month. At

the end of this period, a customer either returns the goods or renews the agreement.

Once a rent-to-own agreement has been renewed a designated number of times, the

customer obtains ownership of the goods.

In 1991, several RAC customers in Minnesota (plaintiff class representatives

Fogie, Leonard, and Adams) filed a class-action lawsuit against RAC, alleging that

RAC had engaged in usury and deceptive and unlawful business practices. The

plaintiffs claimed these practices violated several Minnesota statutes, including the

Consumer Credit Sales Act (CCSA), Minn. Stat. § 325G.15-.16 (1998), and the

General Usury Statute, Minn. Stat. § 334.01-.20 (1998). The plaintiffs also claimed
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that THORN Americas and its parent companies' actions violated several federal

statutes, including RICO, § 18 U.S.C. §§ 1961-1968. Defending its practices, RAC

argued that its rent-to-own agreements complied with Minnesota and federal law, in

particular with Minnesota's Rental Purchase Agreement Act (RPAA), Minn. Stat.

§ 325F.84-.97 (1998).

In March 1993, the District Court certified the plaintiff class to include "all

persons who have entered into rent to own contracts on or after August 1, 1990 in the

State of Minnesota with the defendants or any of their predecessors or successors in

interest in a written form substantially similar to that executed by plaintiff Fogie."

Fogie v. Rent-A-Center, Inc., Civ. No. 4-92-533, slip op. at 17-18 (D. Minn. Mar. 2,

1993) (Memorandum Opinion and Order). The class certification encompasses

individuals who entered approximately 58,000 agreements. The District Court also

determined the rent-to-own agreements were "consumer credit sales" governed by the

CCSA and entered partial summary judgment for the plaintiffs on their CCSA claim.

See id. at 17. The court's decision to treat rent-to-own agreements as consumer credit

sales governed by the CCSA was subsequently endorsed by the Minnesota Supreme

Court in its response to the District Court's certified questions, Fogie v. Rent-ACenters, Inc., 518 N.W.2d 544 (Minn. 1994), and in a separate case, Miller v.

Colortyme, Inc., 518 N.W.2d 544 (Minn. 1994). 

When answering the District Court's certified questions, the Minnesota Supreme

Court also directed the District Court to apply the Minnesota General Usury Statute's

limitation on interest rates to the rent-to-own agreements. See Fogie, 518 N.W.2d at

544. The District Court therefore declared RAC's rent-to-own agreements usurious as

a matter of law under CCSA and the Minnesota General Usury Statute and "unlawful

debt" under RICO. It permanently enjoined RAC from entering into rent-to-own

agreements with interest rates exceeding the General Usury Statute's limits, voided the

existing rent-to-own agreements with the plaintiff class ab initio, ordered rescission of

all payments made by the plaintiff class to RAC, and prohibited RAC from collecting
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or receiving future payments from class members under the voided agreements. RAC

appealed the award of injunctive relief and this Court affirmed, conducting

interlocutory review only of the injunctive relief and interdependent matters.

See Fogie, 95 F.3d at 648, 654.

The District Court later modified its original order, directing the defendants to

hold in escrow all payments received from rent-to-own customers during the litigation.

Appointing a special master to determine the quantum of damages owed to the plaintiff

class on its usury claim and to plan the damage distribution, the District Court also

entered summary judgment for the defendants on the plaintiffs' non-usury claims,

including their claims that THORN Americas and its parent companies had violated

RICO. 

The special master submitted his report and recommendations, and the District

Court essentially adopted them. It entered judgment in favor of the plaintiffs in the

amount of $29,898,250 plus $3418 per day from December 9, 1997, to April 15, 1998.

The District Court also adopted the special master's recommended plan for depositing

and distributing the damages, determined fees for the plaintiffs' attorneys, and ordered

that all funds remaining unclaimed after complete distribution be placed in a cy

pres fund. This appeal followed.

II.

We consider first the issues raised in the plaintiffs' cross-appeal, which

challenges the District Court's dismissal of the plaintiffs' RICO claims. To recover in

a civil suit for a violation of RICO, a plaintiff must prove: (1) that the defendant

violated 18 U.S.C. § 1962; (2) that the plaintiff suffered injury to business or property;

and (3) that the plaintiff's injury was proximately caused by the defendant's RICO

violation. See 18 U.S.C. § 1964(c) (1994); Holmes v. Securities Investor Protection

Corp., 503 U.S. 258, 265-68 (1992); see also United HealthCare Corp. v. American
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Trade Ins. Co., 88 F.3d 563, 572 (8th Cir. 1996). The plaintiffs alleged that RAC

violated subsections (a), (c), and (d) of § 1962 and that each of those violations caused

the plaintiffs injuries for which they can recover under § 1964(c). The District Court

for various reasons dismissed the plaintiffs' claims for alleged violations of § 1962(a),

(c) and (d). We evaluate the plaintiffs' claims under each subsection separately.

A.

The District Court ruled the plaintiffs could not recover for alleged violations of

§ 1962(a) because they did not have standing under § 1964(c) to bring such claims.

Section 1962(a) states that

It shall be unlawful for any person who has received any income derived

. . . from a pattern of racketeering activity or through collection of an

unlawful debt in which such person has participated as a principal . . . to

use or invest . . . 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 . . . interstate or foreign commerce.

18 U.S.C. § 1962(a) (1994). Under §1964(c), only those injured "by reason of" a

§ 1962 violation have standing to bring a civil suit. See 18 U.S.C. § 1964(c); Sedima,

S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985); Appletree Square I, L.P. v. W.R.

Grace & Co., 29 F.3d 1283, 1286 (8th Cir. 1994). The District Court determined that

RAC's usury constituted the collection of unlawful debts and that the plaintiffs were

individuals injured by that unlawful debt collection. But the District Court concluded

that only individuals injured by a completed violation of § 1962(a), those injured by the

use or investment of the racketeering income, have been injured "by reason of" a §

1962(a) claim as § 1964(c) requires. Therefore, since the collection of unlawful debts

was not by itself a violation of § 1962(a), the District Court dismissed the plaintiffs' §

1962(a) claim for lack of standing.
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Determining whether only those injured by the use or investment of racketeering

income have standing to bring a civil suit for violation of § 1962(a), or whether those

injured by the predicate acts of the racketeering activity also have standing, involves

an issue of first impression for this Court, one that has split the other circuits. Seven

of the eight circuits that have addressed the issue agree with the District Court that §§

1962(a) and 1964(c) limit standing only to plaintiffs who have suffered injury from the

use or investment of the racketeering income. See, e.g., Vemco, Inc. v. Camardella,

23 F.3d 129, 132 (6th Cir.), cert. denied, 513 U.S. 1017 (1994); Nugget Hydroelectric,

L.P. v. Pacific Gas & Elec. Co., 981 F.2d 429, 437 (9th Cir. 1992), cert. denied, 508

U.S. 908 (1993); Parker & Parsley Petroleum v. Dresser Indus., 972 F.2d 580, 584 &

n. 4 (5th Cir. 1992); Glessner v. Kenny, 952 F.2d 702, 708-10 (3d Cir.1991); Danielsen

v. Burnside-Ott Aviation Training Ctr., Inc., 941 F.2d 1220, 1229-30 (D.C. Cir.1991);

Ouaknine v. MacFarlane, 897 F.2d 75, 82 (2d Cir.1990); Grider v. Texas Oil & Gas

Corp., 868 F.2d 1147, 1149-51 (10th Cir.), cert. denied, 493 U.S. 820 (1989). The

Fourth Circuit, however, allows plaintiffs whose injuries flow from the predicate acts

as well as to those injured by the use or investment of the racketeering income to bring

a §1962(a) claim. See Busby v. Crown Supply, Inc., 896 F.2d 833, 836-40 (4th Cir.

1990). 

After examining the matter de novo, we believe that the majority position is

correct: under RICO, only individuals who have suffered injury from the use or

investment of racketeering income have standing to bring a civil suit under §§ 1962(a)

and 1964(c). As has been discussed by the other circuits, two grounds support this

conclusion. First, § 1964(c) allows only persons injured "by reason of" a § 1962

violation to bring a civil suit under RICO. A person injured by predicate racketeering

acts, such as RAC's unlawful debt collection, is not injured "by reason of" a violation

of § 1962(a). Rather, that person is injured by conduct constituting only a predicate

act. Cf. Bennett v. Berg, 685 F.2d 1053, 1060 (8th Cir. 1982) ("Significantly, [RICO]

forbids the predicate acts of racketeering only insofar as an 'enterprise' is involved. . . .

 RICO is not a recidivist statute with enhanced penalties for acts of racketeering that
-8-

are elsewhere proscribed in the criminal code."), cert. denied, 464 U.S. 1008 (1983).

In this case, for example, the plaintiffs were injured by RAC's collection of unlawful

debt. They have recovered substantial damages for this injury under Minnesota usury

law, and later in this opinion we uphold that recovery. RAC's collection of unlawful

debt, however, does not constitute a violation of § 1962(a): it does not involve the use

or investment of racketeering 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." 18 U.S.C. § 1962(a). Therefore, the

plaintiffs' injuries did not flow from a violation of § 1962 as § 1964(c) requires.

Rather, RAC violated § 1962(a) only when it used or invested income from its unlawful

debt collection in a manner prohibited by § 1962(a). RICO grants standing only to

parties injured by the use or investment of the unlawfully obtained income, the

completed § 1962(a) violation, and the plaintiffs are not such injured parties. See

also Nugget Hydroelectric, 981 F.2d at 437 (criticizing Busby because, by not requiring

that a plaintiff suffer injury from the use or investment of the racketeering income, the

Fourth Circuit allows "an individual to recover for injuries caused by an action that

does not constitute a violation of § 1962(a)"). 

Second, if individuals injured only by predicate acts could bring a civil action

under § 1962(a), § 1962(c) would be rendered superfluous. Section 1962(c) creates

liability for those persons who "conduct or participate . . . in the conduct" of a RICO

enterprise. See 18 U.S.C. § 1962(c) (1994); see also Reves v. Ernst & Young, 507

U.S. 170, 178-79 (1993). If § 1962(a) were read to allow any person harmed by a

predicate act to bring a civil suit under RICO, a defendant could be held liable for

violating RICO when that defendant engaged in a predicate act, whether or not that

defendant also conducted or participated in the conducting of a RICO enterprise. The

restriction of § 1962(c) liability to those in management positions would be

meaningless. Reading § 1962(a) so broadly that it renders § 1962(c) meaningless runs

contrary to the interpretive canon that statutes should be read to give "each word some

operative effect." Walters v. Metropolitan Educ. Enters., 519 U.S. 202, 209 (1997)
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(citing United States v. Menasche, 348 U.S. 528, 538-39 (1955)). To prevent almost

unlimited civil liability plainly contrary to the statutory scheme of § 1962, standing to

bring a civil suit for a violation of § 1962(a) must be limited to those plaintiffs whose

injuries flow from the use or investment of the racketeering income.

The plaintiffs claim they can satisfy a use-or-investment requirement because

RAC reinvested the income it obtained from the unlawful debt collection in the

operation and maintenance of the rent-to-own business. Such allegations of

reinvestment do not suffice to give the plaintiffs standing under §§ 1962(a) and

1964(c). Rather, to bring a claim under § 1962(a), a plaintiff must allege an injury from

the use or investment of the racketeering income that is separate and distinct from

injuries allegedly caused by the defendant's engaging in the predicate acts. See Vemco,

23 F.3d at 132-33. A distinct injury is required because, if reinvestment "were to

suffice, the use-or-investment injury requirement would be almost completely

eviscerated when the alleged pattern of racketeering is committed on behalf of a

corporation. . . . Over the long term, corporations generally reinvest their profits,

regardless of source." Brittingham v. Mobil Corp., 943 F.2d 297, 305 (3d Cir.1991).

The plaintiffs have not and apparently cannot allege an injury from a use or investment

distinct or separate from the predicate acts they allege. Therefore, the District Court

properly dismissed the plaintiffs' § 1962(a) claim for lack of standing.

B.

The plaintiffs also appeal the District Court's grant of summary judgment to the

defendants on the plaintiffs' § 1962(c) claim. Section 1962(c) makes it "unlawful for

any person employed by or associated with any enterprise engaged in . . . 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." 18 U.S.C. § 1962(c) (1994). The person who conducts or participates

in the conduct of the RICO enterprise must be distinct from the enterprise itself. See
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United HealthCare, 88 F.3d at 570. The District Court concluded the plaintiffs failed

to show the requisite distinctiveness of the persons and enterprise, so it granted the

defendants summary judgment on the plaintiffs' § 1962(c) claim.

The plaintiffs assert that the persons allegedly conducting the RICO enterprise,

THORN Americas and TEMINAH, are sufficiently distinct from the enterprise, RAC.

The plaintiffs explain that THORN Americas conducts the usurious rental-purchase

business nationwide while TEMINAH, the ultimate North American parent company,

receives much of the illegal income. By "RAC," the plaintiffs say they refer to the

alleged RICO enterprise, the "conglomerate of corporate entities that conduct the

corporate affairs of THORN EMI, plc." Appellee/Cross-Appellant's Br. at 45. The

plaintiffs also describe the roles of some of the other corporate entities that made up the

RAC conglomerate: THORN EMI, Inc., for example, was "involved in the cash

management," including paying THORN Americas' bills and transferring the usurious

profits to other related entities; and THORN EMI, plc headed the international

corporate structure. See id.

A corporation such as THORN Americas or TEMINAH may serve as a "person"

for purposes of RICO § 1962(c). See 18 U.S.C. § 1961(3) (1994) (defining "person"

as including "any individual or entity capable of holding a legal or beneficial interest

in property"); see also Atlas Pile Driving Co. v. DiCon Fin. Co., 886 F.2d 986, 995 (8th

Cir. 1989) (involving a RICO enterprise allegedly conducted by two corporate

persons). An association of business entities such as RAC also may serve as an

"enterprise." See United HealthCare, 88 F.3d at 570; Atlas Pile Driving, 886 F.2d at

995 n.7. In this case, however, the plaintiffs allege that the RICO enterprise consists

solely of wholly owned, related business entities, and that some of the wholly owned

subsidiaries conducted the racketeering activities for the enterprise. 

This Court has not previously considered whether the § 1962(c) distinctiveness

requirement may be satisfied when wholly owned subsidiaries are the persons who
3The sole exception is the Eleventh Circuit, which does not require

distinctiveness between the person and enterprise. See Cox v. Administrator United

States Steel & Carnegie, 17 F.3d 1386, 1398 (11th Cir. 1994), cert. denied, 513 U.S.

1110 (1995).

4The plaintiffs claim the Seventh Circuit has determined that allegations that

subsidiaries conducted a parent-company enterprise are sufficient. The plaintiffs base

their argument on Haroco, Inc. v. American National Bank & Trust Co., 747 F.2d 384

(7th Cir. 1984),aff'd on other grounds, 473 U.S. 606 (1985), in which the Seventh

Circuit asserted that it is "virtually self-evident that a subsidiary acts on behalf of, and

thus conducts the affairs of, its parent corporation." 747 F.2d at 402-03. More

recently, however, the Seventh Circuit has indicated that related business entities may

not serve as both the person and enterprise. In Bachman v. Bear, Stearns & Co., No.

98-2396, 1999 WL 335343 (7th Cir. May 26, 1999), the court appears to reject the

conclusion it suggested in Haroco. Stating that it deliberately omitted four corporations

when it described the alleged RICO enterprise, the Court explains, "A firm and its

employees, or a parent and its subsidiaries, are not an enterprise separate from the firm

itself." Id. at *2; see also Fitzgerald v. Chrysler Corp., 116 F.3d 225, 226-27 (7th Cir.

1997) (affirming dismissal on distinctiveness grounds of a complaint that alleged

Chrysler Corporation was the person conducting an enterprise comprised of the

"Chrysler family").

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conduct a RICO enterprise consisting only of the parent company and other related

business entities that comprise the defendants' corporate family. When we look to the

other circuits, we find little direct guidance, but we do find substantial indications that

to impose liability on a subsidiary for conducting an enterprise comprised solely of the

parent of the subsidiary and related businesses would be to misread the statute. Ten

other circuits require that the person and enterprise be distinct.3 Most of these circuits

have suggested some limits on when related business entities, or business entities and

their employees, may serve as both the person and enterprise under § 1962(c). See,

e.g., Bachman v. Bear, Stearns & Co., No. 98-2396, 1999 WL 335343, at *2 (7th Cir.

May 26, 1999);4 Brannon v. Boatmen's First National Bank, 153 F.3d 1144, 1146-47

(10th Cir. 1998);Compagnie de Reassurance D'Ile De France v. New England

Reinsurance Corp., 57 F.3d 56, 92 (1st Cir. 1995); Davis v. Mutual Life Ins. Co., 6
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F.3d 367, 377 (6th Cir. 1993), cert. denied, 510 U.S. 1193 (1995); NCNB Nat'l Bank

v. Tiller, 814 F.2d 931, 936 (4th Cir. 1987), overruled on other grounds by Busby, 896

F.2d at 841-42; Atkinson v. Anadarko Bank & Trust Co., 808 F.2d 438, 440-41 (5th

Cir.) (per curiam), cert. denied, 483 U.S. 1032 (1987). Much of the controversy among

these circuits concerns whether officers or employees of an entity may conduct an

enterprise consisting of the employing entity. Compare, e.g.,Jaguar Cars, Inc. v. Royal

Oaks Motor Co., 46 F.3d 258, 268-69 (3d Cir. 1995) (stating the distinctiveness

requirement is satisfied with allegations of "conduct by officers or employees who

operate or manage a corporate enterprise"); Sever v. Alaska Pulp Corp., 978 F.2d

1529, 1534 (9th Cir. 1992) (determining that employees may conduct their employer

as a RICO enterprise), with Riverwoods Chappaqua Corp. v. Marine Midlands Bank,

30 F.3d 339, 344-45 (2d Cir. 1994) (stating that a group allegedly consisting of a

corporation and two of its employees could not "conduct" the corporation itself as the

RICO enterprise). The plaintiffs have not claimed that any employees or officers of

RAC were the persons conducting the RICO enterprise, however, so we need not

address this issue.

But we must consider whether a subsidiary may be sufficiently distinct from its

parent or other related subsidiaries so as to satisfy § 1962(c)'s distinctiveness

requirement. We believe it cannot. A parent company and a subsidiary are separate

legal entities, but this is not enough. Nor is it enough that the parent and subsidiary

corporations have different roles in the alleged enterprise, as would be typical of every

parent-subsidiary relationship. Rather, there must be a greater showing that the parent

and subsidiary are distinct than the mere fact that they are separate legal entities. To

conclude otherwise would be to read the distinctiveness requirement out of RICO.

Turning our attention to the present case, the plaintiffs have not shown sufficient

distinctiveness between THORN Americas; TEMINAH; THORN EMI, plc; or any of

the other related business entities that allegedly comprise the RAC enterprise. All these

entities are part of one corporate family operating under common control. Therefore,
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we affirm the District Court's granting of summary judgment to the defendants on the

plaintiffs' § 1962(c) claim.

C.

The plaintiffs' final RICO argument is that the District Court incorrectly granted

the defendants summary judgment on a claim that THORN EMI, plc; THORN

Americas; and TEMINAH violated § 1962(d) by conspiring to violate RICO.

Subsection (d) makes it "unlawful for any person to conspire to violate any of the

provisions of subsection (a), (b), or (c) of [§ 1962]." 18 U.S.C. § 1962(d) (1994). The

District Court concluded the plaintiffs' § 1962(d) claim necessarily failed because the

plaintiffs lacked standing to bring a § 1962(a) claim and their § 1962(c) claim failed as

a matter of law.

We affirm the District Court's grant of summary judgment on a different basis.

Cf. Porous Media Corp. v. Pall Corp., 173 F.3d 1109, 1116 (8th Cir. 1999) ("[W]e

may affirm the district court's judgment on any basis supported by the record."). The

plaintiffs allege that the only participants in this conspiracy were THORN EMI, plc and

its wholly owned subsidiaries THORN Americas and TEMINAH. See Third Amended

Complaint at 18. Such allegations fail to allege a conspiracy, because as a matter of

law a parent corporation and its wholly owned subsidiaries are legally incapable of

forming a conspiracy with one another. We believe that Copperweld Corp. v.

Independence Tube Corp., 467 U.S. 752 (1984), in which the Supreme Court held that

a parent and its wholly owned subsidiary lacked the capacity to conspire to violate §

1 of the Sherman Act, requires the identical conclusion when the same principle is

applied to alleged parent-subsidiary RICO civil conspiracies.

In Copperweld, the Supreme Court stated that "[i]n any conspiracy, two or more

entities that previously pursued their own interests separately are combining to act as

one for their common benefit." Copperweld, 467 U.S. at 769 (emphasis added). The
5We do not consider the situation in which a corporation and its officers or

employees allegedly formed a conspiracy. Cf. United States v. American Grain &

Related Indus., 763 F.2d 312, 320 (8th Cir. 1985) (concluding that a corporation may

be convicted of criminal conspiracy where corporate agents conspired with each other

on behalf of the corporation).

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Court determined that an alleged conspiracy between a parent and a subsidiary lacks

this crucial element:

A parent and its wholly owned subsidiary have a complete unity of

interest. Their objectives are common, not disparate; their general

corporate actions are guided or determined not by two separate corporate

consciousnesses, but one. They are not unlike a multiple team of horses

drawing a vehicle under the control of a single driver.

Id. at 771. The Court also noted that the whole notion of an "agreement" between a

parent and a wholly owned subsidiary "lacks meaning." Id.

In our analysis of the plaintiffs' § 1962(c) claim, we have already discussed the

plaintiffs' failure to show any distinctiveness or independence between THORN EMI,

plc and its subsidiaries THORN Americas and TEMINAH. This lack of distinctiveness

or independence reinforces the conclusion derived from Copperweld that THORN

EMI, plc and its subsidiaries "are common, not disparate," and that their actions are

driven by a single consciousness. Cf. id. Therefore, we conclude that THORN EMI,

plc; THORN Americas; and TEMINAH as wholly related business entities are

incapable of conspiring with one another to violate § 1962(c).5

We recognize that the Seventh and Ninth Circuits have reached a conclusion

different from ours. In Ashland Oil, Inc. v. Arnett, 875 F.2d 1271 (7th Cir. 1989), the

Seventh Circuit determined that Copperweld does not prevent a RICO conspiracy from

consisting solely of a parent and its wholly owned subsidiary because, according to the
6We note that the Seventh Circuit's recent decisions regarding intracorporate

liability under § 1962(c), see supra note 4, appear to undercut the conclusions it

reached in Ashland Oil. 

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Seventh Circuit, special policy considerations embodied in the Sherman Act do not

apply in RICO cases. See id. at 1281 (discussing the theoretical "community of

interest" that causes a parent and subsidiary to pose "no threat to the goals of antitrust

law--protecting competition"). The Seventh Circuit stated that liability should extend

to intracorporate RICO conspiracies because "intracorporate conspiracies do threaten

RICO's goals of preventing the infiltration of legitimate businesses by racketeers and

separating racketeers from their profits." Id. In Webster v. Omnitrition International,

Inc., 79 F.3d 776, 787 (9th Cir.), cert. denied, 519 U.S. 865 (1996), the Ninth Circuit

relied upon the Seventh Circuit's reasoning to extend § 1962(d) liability to a wholly

intracorporate conspiracy.6

We find this reasoning unconvincing. Neither the Seventh nor the Ninth Circuit

explains why, when two entities are under common control and there is no

distinctiveness or independence of action, an agreement or understanding between them

creates any of the special dangers § 1962(d) targets. In the absence of such an

explanation, we read the plaintiffs' allegations as essentially asserting that THORN

EMI, plc conspired with its arms and hands. Such allegations are not sufficient. See

United States v. Computer Sciences Corp., 689 F.2d 1181, 1190 (4th Cir.1982) ("[W]e

would not take seriously . . . an assertion that a defendant could conspire with his right

arm, which held, aimed and fired the fatal weapon."), cert. denied, 459 U.S. 1105

(1983).

Therefore, although we do not reach the ground upon which the District Court

relied, we affirm the District Court's grant of summary judgment to the defendants on

the plaintiffs' § 1962(d) claim.
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III.

Now we turn to the arguments raised in RAC's direct appeal regarding the

damages awarded to the plaintiff class on its state-law usury claim. RAC challenges

two aspects of the District Court's award of damages to individual plaintiffs. In order

to give these challenges a context, we briefly summarize the District Court's damage

distribution plan. The distribution plan divides plaintiffs into three groups. The first

group includes two subgroups: those plaintiffs who leased goods that RAC did not

designate for return and those who had previously returned their leased goods to RAC.

Under the District Court's distribution plan, plaintiffs in both subgroups recover all

principal and interest paid. The second group of plaintiffs consists of those plaintiffs

who, when RAC designated their goods for return, elected to retain the goods. These

plaintiffs receive a refund only of the interest they paid under the rent-to-own

agreements. The third group also leased goods that RAC designated for return, but,

unlike the second group, the third group elected to return those goods. The District

Court's order grants this group, like the first group, repayment of all principal and

interest paid. See Fogie v. THORN Americas, Inc., Civ. No. 3-94-359, slip op. at 7-8

(D. Minn. Apr. 15, 1998) (Order for Judgment; Orders in Enforcement of Injunction,

Allowing Attorneys' Fees and Costs, and Plan of Distribution) [hereinafter "Order for

Judgment"]. 

The first aspect of the damage distribution plan that RAC challenges is that it

allows some plaintiffs--apparently members of the first and second groups--to keep the

goods they had leased without paying RAC the full value of those goods. According

to RAC, plaintiff class members failed to pay the department-store price for the goods

leased (i.e., the fair value of the goods as determined by an unrelated retail seller) in

approximately 37,500 of the 58,000 rent-to-own agreements covered by the class

certification. The distribution plan allows plaintiffs who entered those 37,500

agreements to keep the goods, even those goods RAC designated for return, without

making further payments. RAC claims this awards such plaintiffs an improper windfall.
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Citing Burney v. THORN Americas, Inc., 944 F. Supp. 762 (E.D. Wis. 1996), RAC

urges this Court to redefine the plaintiff class to exclude such plaintiffs, whom RAC

calls "windfall plaintiffs." 

Reviewing this legal issue de novo, we find that the District Court's order is

consistent with Minnesota usury law, which permits a victim of usury to retain goods

purchased through a usurious contract without paying full value for them. Since 1877,

the Minnesota usury statute has provided two remedies for victims of usury: recovery

of all interest paid pursuant to Minnesota Statutes § 334.02; and a declaration that the

usurious contract is canceled as void pursuant to §§ 334.03 and 334.05. See Barton

v. Moore, 558 N.W.2d 746, 750-51 (Minn. 1997). Minnesota courts have long stated

that, when a victim of usury cancels a usurious contract, the victim does not need to

compensate the usurer for the goods obtained under the usurious contract as a condition

for receiving cancellation. In Trauernicht v. Kingston, 195 N.W. 278 (Minn. 1923), the

Minnesota Supreme Court stated, "The general rule over the country is that a borrower

on usury when he comes to a court of equity asking affirmative relief by way of the

cancellation of an obligation . . . must restore the money actually received. . . . Our

own rule, often announced, is that restoration need not be made." Id. at 279. The

Minnesota Supreme Court determined that the Minnesota General Usury Statute

requires this result. See id.

Trauernicht's interpretation of the Minnesota usury statute remains valid.

See First Fed. Sav. & Loan Ass'n v. Guildner, 295 N.W.2d 501, 503 (Minn. 1980)

(citing Trauernicht for the principle that a "plaintiff suing for cancellation of [a]

usurious loan need not return the money actually received"); see also In re Estate of

Fauskee, 497 N.W.2d 324, 328 (Minn. Ct. App. 1993) ("If a loan is usurious, it is

unenforceable and the lender must forfeit interest and principal payments."). Under

Minnesota law, therefore, if a seller commits usury when selling goods, the buyer may

keep the goods purchased without paying the seller the full value of the goods. The

buyer also may cancel the contract pursuant to §§ 334.03 and 334.05 and demand that
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the usurious seller repay all interest collected as required by § 334.02. The District

Court's distribution plan grants the so-called windfall plaintiffs nothing more than that

specified by Minnesota law. This Court has no reason to redefine the plaintiff class as

RAC requests.

The second aspect of the District Court's damage distribution that RAC

challenges is the provisions that force RAC to repay principal and interest to plaintiffs

in the first and third groups. Relying on Rathbun v. W. T. Grant Co., 219 N.W.2d 641

(Minn. 1974), and its progeny, RAC argues that Minnesota law allows victims of usury

to recover interest only. In Rathbun, a class-action lawsuit involving usurious retail

sales installment contracts, the Minnesota Supreme Court determined "that the recovery

of both interest and principal provide[d] a remedy too harsh under the circumstances."

219 N.W.2d at 653. Therefore, the Minnesota Supreme Court permitted the plaintiffs

to recover interest only. See id. RAC claims that Rathbun provides a bright-line rule

for Minnesota usury lawsuits, or at the least for usury class-action lawsuits similar to

Rathbun and the present case, that limits a usury victim's recovery to interest only. We

disagree.

As we have already discussed, the Minnesota General Usury Statute grants usury

victims two remedies: return of all interest paid and cancellation of the contract as void.

See Barton, 558 N.W.2d at 750. When a usurious loan is canceled, "the one guilty of

usurious exaction must bear the legal consequences flowing from such violation. As

such he must lose not only the interest on the money risked, but also the principal,

including as well all security given to secure performance." Midland Loan Fin. Co. v.

Lorentz, 296 N.W. 911, 915 (Minn. 1941); accord United Realty Trust v. Property

Dev. & Research Co., 269 N.W.2d 737, 743 n.12 (Minn. 1978); Fauskee, 497 N.W.2d

at 328. The distribution plan, therefore, correctly enforces Minnesota law when it

compels RAC to forfeit and repay all principal and interest collected on the usurious

loans.
-19-

Rathbun and its progeny do not create a bright-line rule to the contrary. Rather,

Rathbun and its progeny indicate that in some circumstances the forfeiture of both

principal and interest may punish the usurer too harshly. See Rathbun, 219 N.W.2d at

653 (stating "that the recovery of both interest and principal provides a remedy too

harsh under the circumstances" (emphasis added)); Katz & Lange, Ltd. v. Beugen, 356

N.W.2d 733, 735 (Minn. Ct. App. 1984) ("Although the interest rate . . . was usurious,

[the] counterclaim seeking to have the entire underlying debt declared void is too harsh

under the circumstances. Forfeiture of all the charges is a sufficient remedy."

(emphasis added) (citation omitted)); Kudzia v. Wiese, No. C7-93-1906, 1994 WL

233599 (Minn. Ct. App. May 31, 1994) (unpublished) (citing Rathbun and Beugen for

the proposition that "[u]nder some circumstances . . . forfeiture of the interest alone is

the proper remedy for usury because forfeiture of both the principal and interest would

be too harsh a remedy" (emphasis added)).

This case does not involve circumstances in which the forfeiture of principal and

interest constitutes too harsh a remedy. The Order for Judgment permits a plaintiff to

recover both principal and interest only when RAC failed to designate the plaintiff's

goods for return or when the plaintiff returned goods RAC designated for return. In

these instances, the Order for Judgment essentially rescinds the original contract: RAC

has to repay both principal and interest only when it either recovers the leased goods

or declines to recover those goods, apparently because the goods have little residual

value. Rescission is a common remedy that does not seem too harsh, nor does RAC

argue that it is. Furthermore, Rathbun and its progeny do not involve rescission cases.

Concluding the distribution plan's awarding of principal and interest to plaintiffs in the

first and third groups is permitted by Minnesota law and not too harsh considering the

circumstances of this case, we affirm the District Court on this matter.

IV.
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RAC also claims that the District Court erred when it granted the plaintiff class

a retrospective remedy based on Miller v. Colortyme, Inc., 518 N.W.2d 544 (Minn.

1994). In Minnesota, "[t]he general rule is that . . . [a] decision is to be given

retroactive effect." Hoff v. Kempton, 317 N.W.2d 361, 363 (Minn. 1982). But

Minnesota courts recognize that sometimes retroactive application of a judicial decision

is inappropriate. To determine when a legal principle should be applied prospectively

only, Minnesota courts employ a three-factor standard the United States Supreme Court

described in Chevron Oil Co. v. Huson, 404 U.S. 97 (1971). The three factors to

consider are: (1) whether the decision overrules clear precedent or resolves an issue of

first impression in a manner "not clearly foreshadowed"; (2) whether, considering the

history, purpose, and effect of the legal principal at issue, retroactive application will

retard, not further, that principle; and (3) whether the inequities that would result from

retroactive application provide an ample basis for applying the legal rule prospectively

only. See Hoff, 317 N.W.2d at 363 (quoting Chevron Oil, 404 U.S. at 106-07); see

also Holmberg v. Holmberg, 588 N.W.2d 720, 726 (Minn. 1999). 

This Court already considered the Chevron Oil factors and determined that

retroactive application of the Miller v. Colortyme decision is appropriate. See Fogie,

95 F.3d at 651. RAC argues that our decision in Fogie does not foreclose its argument

that a retrospective remedy is inappropriate because the United States Supreme Court

distinguishes between retroactive application of a rule and the awarding of a

retrospective remedy based upon the rule, and recognizes that sometimes retroactiveapplication and retrospective-remediation issues should be considered independently.

See Reynoldsville Casket Co. v. Hyde, 514 U.S. 749, 754-59 (1995) (summarizing

four instances when the Supreme Court observed this application-remediation

distinction). Without examining the Reynoldsville Casket decision further, RAC argues

this case is one in which this Court should consider the retrospective-remediation issue

separately. RAC believes that, should we engage in independent retroactivity analysis

of the remediation issue and use the Chevron Oil factors as directed by Hoff, we will

conclude that the District Court erred in granting a retrospective remedy. RAC makes
7While Reynoldsville Casket states that sometimes retrospective remediation

should be considered independently from retroactive application and provides instances

of when such independent consideration was appropriate, the Supreme Court in

Reynoldsville Casket does not provide a test a court should use when evaluating

whether a retrospective remedy is appropriate. The Supreme Court, however, largely

superseded Chevron Oil when, in Harper v. Virginia Department of Taxation, 509 U.S.

86, 96-97 (1993), it enunciated a new standard for assessing when a legal principle

should be applied retroactively. Under this new standard, "[w]hen [the Supreme] Court

applies a rule of federal law to the parties before it, that rule is the controlling

interpretation of federal law and must be given full retroactive effect in all cases still

open on direct review and as to all events." Id. at 97 If this Court applied the

Harper standard to the present case, the Minnesota Supreme Court's decision to apply

Miller v. Colortyme to the parties before it would seem to compel us also to apply

Miller v. Colortyme retroactively in this case.

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such claims even though the Minnesota Supreme Court declined to apply the Miller v.

Colortyme decision prospectively only. See Miller v. Colortyme, No. C2-92-2595, slip

op. at 1 (Minn. Aug. 2, 1994) (Order denying petition for clarification).

In raising its retrospective-remediation argument, RAC bids us to make three

substantial analytical leaps. First, there is no precedent indicating that Minnesota

courts would make the application-remediation distinction the Supreme Court

recognized in Reynoldsville Casket. Second, the United States Supreme Court, while

recognizing the application-remediation distinction, has largely superseded Chevron

Oil with a test under which we would be compelled to apply Miller v.

Colortyme retroactively.

7

 Thus, while encouraging us to employ a distinction not

previously recognized by any Minnesota court, RAC urges us to use a Minnesota

standard that would not be used in federal courts, the courts that have recognized the

distinction. Third, RAC has not attempted to prove that, even if Minnesota courts

would distinguish between retroactive application and retrospective remedy, the present

case is one in which retroactive application and retrospective remedy should be
-22-

considered separately. Nevertheless, RAC urges us to engage in a separate remediation

analysis.

We do not explore these three analytical leaps, however, because even if we

resolved each one in RAC's favor we would still conclude that the District Court did

not err when it awarded a retrospective remedy. Applying the three-factor Chevron

Oil standard to consider the propriety of awarding a retrospective remedy, we would

first recognize that Miller v. Colortyme did not overturn a prior decision nor did it

announce a legal principle not clearly foreshadowed in Minnesota law. Rather, Miller

v. Colortyme "simply stated a reasonable and correct interpretation of the law which

differs from the erroneous view RAC had chosen to follow." Fogie, 95 F.3d at 651.

According to the Minnesota Supreme Court in Miller v. Colortyme, this interpretation

flows from the only conceivable reason the Minnesota legislature amended the CCSA

in 1981--because it wanted the CCSA to cover rent-to-own agreements. See Miller v.

Colortyme, 518 N.W.2d at 548.

Second, awarding a retrospective remedy would further, not retard, the principles

of the Minnesota usury statute as reflected in its purpose, history, and effect. The

Minnesota General Usury Statute seeks "to protect the weak and necessitous from

being taken advantage of by lenders who can unilaterally establish the terms of the loan

transaction." Trapp v. Hancuh, 530 N.W.2d 879, 884 (Minn. Ct. App. 1995). RAC

charged interest on the rent-to-own agreements ranging from 46 to 746 percent,

see Fogie, 95 F.3d at 652, approximately six to ninety-three times greater than the eight

percent permitted under Minnesota law. See Minn. Stat. § 334.01 (1998). The award

of a retrospective remedy for such conduct, while perhaps harsh, would further the

statutory purpose of discouraging business entities from charging excessive interest

rates on loans to consumers. Moreover, this remedy comports with the history and

traditional effects of the Minnesota usury statute, under which courts have held that a

victim may recover the principal and interest paid and security given without even

paying the usurer the principal borrowed. See supra Part III.
-23-

Third, we reject RAC's arguments that the inequities that would result from

awarding a retrospective remedy provide a compelling basis for us to grant only

prospective relief. RAC complains that a retrospective remedy will unjustly

compensate plaintiffs because it will allow them to escape paying for RAC's overhead

expenses and for use of and damage to the leased goods. RAC ignores that it charged

interest rates far in excess of the legal limits. RAC also ignores that the Order for

Judgment allows RAC to keep some income from its usurious transactions: profits

included in the retail price of designated goods the second group of plaintiffs had paid

for and chose to keep and income RAC made using or investing the plaintiffs' payments

of principal and interest before the plaintiffs filed suit. The equities of this case do not

provide a sufficient basis for us to conclude that only prospective relief is appropriate.

None of the three Chevron Oil factors weighs in favor of denying the plaintiffs

a retrospective remedy. Furthermore, as we have already stated, the Minnesota

Supreme Court has refused to amend Miller v. Colortyme to make it apply only

prospectively. See Miller v. Colortyme, No. C2-92-2595, slip op. at 1 (Minn. Aug. 2,

1994) (Order denying petition for clarification). Reassured by the Minnesota Supreme

Court's refusal to amend Miller v. Colortyme that our determination correctly interprets

Minnesota law, we affirm the District Court's grant of a retrospective remedy.
-24-

V.

RAC also challenges the cy pres fund that the judgment of the District Court

creates for unclaimed damages. According to the Order for Judgment, if any monies

remain "[a]fter the Unlocated Members Subfund is closed . . . , the pay over of waived

principal refunds to [THORN] is completed . . . , all disputes are resolved . . . [,] all

checks issued on the Common Fund have either expired or been cashed," and certain

other taxes, fees, and expenses are paid, they are to be placed in a cy pres fund. Order

for Judgment at 12. The District Court directs class counsel at that time to provide an

accounting to the District Court and "petition the [District] Court for direction on

distribution of the Cy Pres Fund." Id. at 13.

RAC claims that the creation of a cy pres fund is unprecedented and

inappropriate when, as in this case, the District Court formulates an individualized

remedy tied to specific transactions, and all class members are known and will receive

full compensation if they come forward. RAC argues that undistributed funds should

be returned so that RAC can compensate class members who seek payment after the

common fund is closed but still within the time for enforcing a judgment set forth by

Minnesota law. 

Several questions regarding the cy pres fund remain unanswered. Most

importantly, we do not yet know whether any undistributed monies will remain. For

all that appears, at the end of the day there may be nothing left to go into the fund.

Moreover, the District Court has not decided how any such funds will be distributed

or to whom. In the absence of information regarding the existence and amount of

residual funds, the District Court acted prematurely in ordering the creation of a cy pres

fund. Accordingly, we vacate the portion of the District Court's order that creates the

cy pres fund for unclaimed monies without prejudicing the District Court's ability to

consider the creation of a cy pres fund if in fact there are unclaimed monies left after

the plan for the payout of damages has been fully carried out. Cf. Hennenfent v. Mid
-25-

Dakota Clinic, P.C., 164 F.3d 419, 420 (8th Cir. 1998) (vacating without prejudice a

district court's determination that an ADA plaintiff could not perform an essential

function of his job because the plaintiff might still elect to undergo the medical testing

necessary to make that determination).

VI.

Finally, RAC argues the District Court mistakenly granted the plaintiffs double

recovery when it ordered RAC to return funds from an escrow account to the plaintiffs.

RAC claims that the $1.6 million in escrow funds were already included when the

parties stipulated that RAC had received $27.9 million from the plaintiff class in

transactions governed by the rent-to-own agreements. The District Court found to the

contrary, ordering RAC to return the $1.6 million in escrow funds and to pay damages

based on the $27.9 million in receipts. We review this factual determination for clear

error. See Chicago Title Ins. Co. v. FDIC, 172 F.3d 601, 604 (8th Cir. 1999).

To determine whether the escrow funds were included in the damage stipulation,

we trace the history of the two amounts. Initially, the District Court did not establish

an escrow account; rather, it ordered RAC to "cease making any further collections or

receiving any further payments of any kind from the Plaintiff Class on the rental

purchase agreements." Fogie v. Rent-A-Center, Inc., No. 3-94-359, slip op. at 16 (D.

Minn. Sept. 28, 1995) (Memorandum Opinion and Order). RAC later requested that

the District Court stay this requirement, claiming that, because the District Court's order

prevented RAC from contacting the class members, RAC's return of payments without

explanation would create unnecessary confusion. The District Court agreed with RAC

that returning payments would create unnecessary confusion but declined to grant a

stay. Instead, the court ordered RAC to place all payments received in a "separate,

interest bearing account" until the plaintiffs were notified regarding the outcome of this

litigation. See Fogie v. THORN Americas, Inc., No. 3-94-359, slip op. at 7 (D. Minn.

Feb. 19, 1997) (Memorandum Opinion and Order).
-26-

The parties subsequently stipulated that the total amount of sales subject to

rescission--that is, the amount "reflect[ing] receipts on rental purchase contracts issued

by [THORN] from August 1, 1990, through November 13, 1996"--totaled

approximately $27.9 million. See Order for Judgment at 2. The District Court used

this amount to calculate interest, made other adjustments, and ordered RAC to pay

approximately $29.9 million in damages. The District Court also ordered RAC to

return the $1.6 million in payments that had been placed in escrow.

After reviewing the District Court's orders regarding the treatment of payments

received after litigation commenced, the creation of the escrow account, and the Order

for Judgment, we do not believe the District Court clearly erred when it determined that

the escrow funds were not included in the total damage stipulation. The damage

stipulation provided the total amount of RAC's actual receipts. Because the funds

placed in escrow were never received by RAC, the District Court did not clearly err

when it determined the escrow funds were not included in the damage stipulation.

Therefore, we uphold the District Court's decision to calculate damages based on the

$27.9 million stipulation and also order RAC to return the $1.6 million in escrow funds.

VII.

For the reasons stated above, the judgment of the District Court is vacated

without prejudice insofar as it creates a cy pres fund. In all other respects, the

judgment of the District Court is affirmed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.