* Chief Judge of the Western District of Louisiana, sitting by

designation.

REVISED

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 96-30525

RAJIV KHURANA,

Plaintiff-Appellant,

VERSUS

INNOVATIVE HEALTH CARE SYSTEMS, INC.; KARRY TEEL;

CARL HOLDEN; WILLIAM MALONE; I.H.S. RIVER REGION

HOSPITAL OF VACHERIE, LA., INC.,

Defendants-Appellees.

Appeal from the United States District Court

for the Eastern District of Louisiana

December 12, 1997

Before WIENER, PARKER, Circuit Judges, and LITTLE,* Chief District

Judge.

PARKER, Circuit Judge:

Dr. Rajiv Khurana appeals the district court’s dismissal of

his complaint pursuant to Fed. R. Civ. P. 12(b)(6) on the basis

that he did not have standing to bring his civil claims under the

Racketeer Influenced and Corrupt Organizations Act (“RICO”) and
 

1 Khurana’s state law claims were remanded to state court following

the district court’s Fed. R. Civ P. 12(b)(6) dismissal of his RICO claims.

Only issues related to the dismissal of Khurana’s RICO claims are before

the panel.

 

2 18 U.S.C. § 1962(b)-(d) is as follows:

 (b) It shall be 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 of foreign commerce.

 (c) It shall be 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.

 (d) It shall be unlawful for any person to conspire to

violate any of the provisions of subsection (a), (b), or

2

alternatively, because Khurana failed to plead a RICO enterprise

separate and distinct from the defendant in some of his civil

claims based on 18 U.S.C. § 1962(c). Finding that Khurana may have

standing for some of his civil RICO claims, we affirm in part and

reverse and remand in part.

 FACTS AND PROCEEDINGS BELOW

For purposes of this appeal, we accept the following factual

allegations as true.

Dr. Rajiv Khurana (“Khurana”) filed suit in Louisiana state

court against the defendant-appellees, alleging defamation and

wrongful discharge from his position as Medical Director of River

Region Hospital in Vacherie, Louisiana,1 as well as civil claims

under the Racketeer Influenced and Corrupt Organizations Act

(“RICO”), U.S.C. § 1961 et seq., based on violations of 18 U.S.C.

§ 1962(b), (c), and (d).2 Khurana’s civil RICO claims arise from
(c) of this section.

3

a Medicare and Medicaid fraud scheme in which the appellees were

engaged.

River Region Hospital (“River Region” or “hospital”) is an

owned subsidiary of Innovative Health Care Systems, Inc.

(“Innovative”). Both River Region and Innovative are defendantappellees in this action. Defendant-appellees also include Karry

Teel and Carl Holden, who hold offices in both Innovative and River

Region, and William Malone, River Region’s administrator. 

Khurana is a practicing physician with dual specialities in

psychiatry and neurology. In July 1993, Khurana was hired to be

River Region’s Assistant Medical Director under a three-year

contract. Khurana agreed to join River Region as its Assistant

Medical Director on the basis of fraudulent misrepresentations as

to the legitimacy of the hospital’s operations and qualifications.

In June of 1994, Khurana was named the hospital’s Medical Director.

After his promotion, he became aware that the hospital was engaging

in fraudulent Medicaid and Medicare practices. He was discharged

from his position as Medical Director six months later in January

of 1995. The hospital went out of business in 1996.

After the appellees removed the suit to federal court, Khurana

filed an amended complaint alleging that the appellees committed a

variety of RICO predicate acts (wire and mail fraud, extortion,

bribery, witness tampering, and violation of the Travel Act, 18

U.S.C. § 1952) and that these acts constituted a pattern of

racketeering activity in violation of § 1962(b) and § 1962(c).
4

Khurana also alleged a conspiracy, in violation of 18 U.S.C.

§ 1962(d), to violate 18 U.S.C. § 1962(b) and § 1962(c). In his

complaint, Khurana contended (1) that he was fraudulently induced

into “harmful employment associations” which caused him a loss of

legitimate business opportunity and damage to his professional

reputation, (2) that he was wrongfully discharged which caused him

a loss in earnings, benefits and reputation, and (3) that the

appellees’ “illegal competition” with him in his private and

hospital practices caused him a loss in business income. 

The appellees filed a motion to dismiss Khurana’s RICO claims

pursuant to Fed. R. Civ. P. 12(b)(6). The appellees argued to the

district court that (1) Khurana did not have standing to assert the

RICO claims, and that (2) Khurana failed to allege a RICO

“enterprise” separate and distinct from a RICO “person,” i.e., a

perpetrator, associated with or employed by the enterprise as

required for claims based on 18 U.S.C. § 1962(c). The district

court granted the motion and Khurana now presents this panel with

the same two issues in his appeal. 

DISCUSSION

I. Standard of Review

We review the dismissal of a complaint for a failure to state

a claim for which relief can be granted under Fed. R. Civ. P.

12(b)(6) de novo. Fernandez-Montes v. Allied Pilots Ass’n, 987

F.2d 278, 284 (5th Cir. 1993). A claim may not be dismissed unless

it appears beyond doubt that the plaintiff cannot prove any set of

facts in support of his claim which would entitle him to relief.
5

Benton v. United States, 960 F.2d 19, 21 (5th Cir. 1992). For

purposes of our review, we must accept the plaintiff’s factual

allegations as true and view them in a light most favorable to the

plaintiff. Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th

Cir. 1995).

II. § 1964(c) RICO Standing

The appellant argues that the district court erred in

dismissing the RICO claims because proper causation between his

injuries and RICO violations was pleaded, giving him standing. The

appellees collapse the appellant’s injuries into one mass of

discharge complaints and contend that Khurana cannot have standing

for any of his claims because he was not the target of any

Medicaid/Medicare fraud scheme. We disagree that Khurana’s alleged

injuries may be viewed as a homogeneous group. We consider the

injuries individually because Khurana’s standing for each turns on

a proximate causation inquiry. 

A. Overview of § 1964(c) Standing

Section 1964(c) provides that 

[a]ny person injured in his business or property by

reason of a violation of section 1962 of this

chapter may sue therefor in any appropriate United

States district court and shall recover threefold

the damages he sustains and the cost of the suit,

including a reasonable attorney’s fee.

18 U.S.C. § 1964(c). In order to establish standing under §

1964(c), a plaintiff must show (1) a violation of § 1962, (2) an

injury to his business or property, and (3) that his injury was

proximately caused by a RICO violation. See Holmes v. Securities

Investor Protection Corp., 503 U.S. 258, 112 S. Ct. 1311, 117 L.
 

3 The Court noted that in using such a term, it did “not necessarily

use it in the same sense as courts before us have.” Holmes, 503 U.S. at

274 n.20.

6

Ed. 2d 532 (1992); Cullom v. Hibernia Nat’l Bank, 859 F.2d 1211,

1214 (5th Cir. 1988). Khurana challenges the district court

determination that his injuries were not proximately caused by RICO

violations.

When the Supreme Court announced the proximate cause

prerequisite to § 1964(c) standing in Holmes, 503 U.S. 258, it

directed us to “the many shapes this concept took at common law.”

Id. at 268. 

[W]e use “proximate cause” to label generically the

judicial tools used to limit a person’s

responsibility for the consequences of that person’s

own acts. At bottom, the notion of proximate cause

reflects “ideas of what justice demands, or of what

is administratively possible, or of what is

administratively possible and convenient.” W.

Keeton, D. Dobbs, R. Keeton & D. Owen, Prosser &

Keeton on Law of Torts § 41, p. 264 (5th ed. 1984).

Id. at 268. In Holmes, the Court held that an alleged stock

manipulation scheme that disabled two broker-dealers from meeting

obligations to customers did not proximately cause the claimed

injury of a plaintiff-corporation subrogated to the rights of the

broker-dealers’ non-purchasing customers. Such was too remote an

injury to satisfy the proximate cause requirement because only an

intervening insolvency connected the RICO conspirators’ acts to the

customers’ injuries. Id. at 271. Taking guidance from the common

law’s enunciation of proximate causation, the Court reasoned that

those injured only “indirectly” by racketeering activity do not

have § 1964(c) standing.3 Id. at 268, 274. Allowing for recovery
 

4 To repeat, 18 U.S.C. § 1964(c) is as follows:

Any person injured in his business or property by reason

of a violation of section 1962 of this chapter may sue

therefor in any appropriate United States district court

and shall recover threefold the damages he sustains and

the cost of the suit, including reasonable attorney’s

fees.

(emphasis added).

 

5 In fact, it is generally true that an articulation of the meaning

of “proximate cause” is a “fruitless quest for a universal formula.”

Prosser & Keeton on Torts § 42, p. 279. “The search for some test or

formula which will serve as a universal solvent for all of the problems of

‘proximate cause’ has occupied many writers.” Id. at 276.

 

6 In his concurrence, Justice Scalia offered a thought in the same

vein.

7

for the Holmes’ secondary victims would run afoul of proximate

causation standards. Id. at 274. In her concurrence, Justice

O’Connor explained that the “words ‘by reason of’ [in § 1964(c)]

operate . . . to confine RICO’s civil remedies to those whom the

defendant has truly injured in some meaningful sense.”4 Id. at

279. The proximate cause requirement is intended to preclude

recovery by plaintiffs who “complain[] of harm flowing merely from

the misfortunes visited upon a third person.” Id. at 268.

In Holmes, the Court acknowledged that articulating a

definition of “proximate cause” for purposes of § 1964(c) standing

analysis was difficult:5 “the infinite variety of claims that may

arise make it virtually impossible to announce a black-letter rule

that will dictate the result in every case. Thus, our use of the

term ‘direct’ should be merely understood as a reference to the

proximate cause enquiry that is informed by the concerns set out in

the text.” 503 U.S. at 274 n.20.6 These concerns have been cited
The degree of proximate causality required to recover

damages caused by predicate acts of sports bribery, for

example, will be quite different from the degree required

for damages caused by predicate acts of transporting

stolen property.

503 U.S. at 288 (Scalia, J., concurring) (statutory citations omitted).

8

as the demands of justice, a reluctance to open the flood gates to

administratively inconvenient and unmanageable litigation,

Standardbred Owners Ass’n v. Roosevelt Raceway Assocs., 985 F.2d

102, 104 (2d Cir. 1993) (citing Holmes, 112 S. Ct. at 1316 n.10,

1318), the potential for duplicative recoveries and superfluous

deterrence, In re Am. Express Co. Shareholder Litig., 39 F.3d 395,

401 (2d Cir. 1994), and the statutory goal of encouraging directly

injured victims to act as private attorneys general to vindicate

the law, Mendelovitz v. Vosicky, 40 F.3d 182, 185 (7th Cir. 1994);

Bieter Co. v. Blomquist, 987 F.2d 1319, 1325 (8th Cir. 1993). 

Given that factual causation (i.e., “cause-in-fact” or “butfor” causation) is now clearly insufficient to confer § 1964(c)

standing, see, e.g., Standardbred, 985 F.2d at 104, we are left

with the common law of proximate causation in making civil RICO

standing determinations. “[T]he holding of Holmes is no more than

that common law ideas about proximate causation inform the

understanding of RICO.” Israel Travel Advisory Serv., Inc. v.

Israel Identity Tours, Inc., 61 F.3d 1250, 1257 (7th Cir. 1995),

cert. denied, — U.S. —, 116 S. Ct. 1847, 134 L. Ed. 2d 948 (1996).

The pertinent inquiry in determining the existence of proximate, or

“legal,” cause is “whether the conduct has been so significant and

important a cause that the defendant should be held responsible.”
 

7 While Cullom predated Holmes, like Holmes, it imposed a proximate

causation requirement for § 1964(c) standing. Thus, Holmes did not disturb

the our holding in Cullom.

9

Chisholm v. TransSo. Fin. Corp., 95 F.3d 331, 336 (4th Cir. 1996)

(quoting Prosser & Keeton on Torts § 42, p. 272 (5th ed. 1984)).

The proximate cause determination for RICO standing is guided by

indications of preconceived purpose, specifically intended

consequence, necessary or natural result, reasonable foreseeability

of result, the intervention of independent causes, whether the

defendant’s acts are a substantial factor in the sequence of

responsible causation, and the factual directness of the causal

connection. See, e.g., Chisholm, 95 F.3d at 338; In re Am.

Express, 39 F.3d at 400; Standardbred, 985 F.2d at 104. 

B. Termination as a Result of a § 1962(b) or § 1962(c)

Violation

Khurana claimed that he was discharged from his position as

Medical Director of River Region Hospital because he refused to

participate in and attempted to stop the appellees’ RICO activities

and that his discharge was an act in furtherance of the appellees’

fraud scheme. Those claims are foreclosed for a § 1962(b) or §

1962(c) violation. In Cullom v. Hibernia Nat’l Bank,

7 we held that

an employee who refuses to participate in an activity that violates

RICO and is constructively discharged for such a refusal does not

have standing to sue under § 1964(c). 859 F.2d 1211, 1212 (5th

Cir. 1988). We found that such a situation lacked the necessary

“causal connection” between the discharge and the predicate acts.

Id. at 1216 (discussing and relying on RICO “whistle blower” cases
10

and citing Sedima, 473 U.S. 479). In order to have standing,

Khurana’s injury, here his discharge, must “flow from the

commission of the predicate acts.” Id. (quoting Sedima, 473 U.S.

at 497). In our proximate causation discussion in Cullom, we

explained that “Cullom’s injury resulted from SNB’s decision to

fire him after he refused to participate in the alleged

scheme . . . [N]either Cullom’s injury nor SNB’s decision to fire

Cullom resulted from the alleged predicate acts.” Id. at 1216. 

Just as in Cullom, Khurana pleaded predicate acts for the

alleged violations which did not proximately cause his termination.

Accordingly, Khurana lacks standing to bring a civil claim

asserting termination injuries resulting from a § 1962(b) or §

1962(c) violation.

C. Loss of Business Income as a Result of “Illegal

Competition” with Khurana’s Hospital and Private

Practices

We confront the same standing questions with respect to

Khurana’s standing to bring his civil RICO claim for “illegal

competition:” was there (1) an alleged injury to property or

business (2) proximately caused by (3) a RICO violation? See

Holmes, 503 U.S. at 258; Cullom, 859 F.2d at 1214.

Khurana alleges that the defendants illegally competed with

his post-termination medical practice. The defendants treated

psychiatric patients for which they illegally obtained Medicaid and

Medicare reimbursement, thus depleting the available number of

reimbursable patients in the region, some of whom might otherwise

have been treated by Khurana and other area hospitals at which he
11

practiced. 

Khurana’s loss of business income is too remote to satisfy the

proximate causation requirement. See Holmes, 503 U.S. at 267, 272

(“direct-injury limitation [is] among the requirements of §

1964(c)”). Khurana’s injury does not “flow,” Sedima, 473 U.S. at

497, from either the conspiracy to engage in a pattern of

racketeering activity or from any engagement in a pattern of

racketeering activity. There are intervening factors between the

defendants’ fraudulently obtaining Medicaid and Medicare

reimbursement and Khurana’s loss of business income, e.g., a

significant reduction of the available pool of patients in that

market, patients’ choices of physicians, Khurana’s ability to

accommodate additional patients, and exhaustion of state-allocated

funds. Justice Scalia offered an apt observation in his

concurrence in Holmes.

Life is too short to pursue every human act to its

remote consequences; “for want of a nail, a kingdom

was lost” is a commentary on fate, not the statement

of a major cause of action against a blacksmith.

503 U.S. at 287. The necessary contributing factors to this injury

to Khurana make it clear that such an injury was not proximatley

caused by the defendants. See, e.g., Pillsbury, Madison & Sutro v.

Lerner, 31 F.3d 924 (9th Cir. 1994) (finding proximate cause

lacking because plaintiff subleased office space from another

entity and direct harm ran to the master tenant since plaintiff’s

harm was contingent on the master tenant’s decision to pass the

rent increase through to the subletter-plaintiff); Imagineering

Inc. v. Kiewet Pacific Co., 976 F.2d 1303, 1312 (9th Cir. 1992)
12

(finding no “direct relationship” between defendants’ conduit

scheme and plaintiffs’ failure to earn certain profits on

subcontracts because intervening inability of prime contractors to

secure the contracts was direct cause of plaintiffs’ injuries);

Firestone v. Galbreath, 976 F.2d 279, 284, 285 (6th Cir. 1992)

(finding only indirect injury where grandchildren alleged that

defendants stole from grandmother during her lifetime, thus

decreasing the size of her estate and their inheritance); cf.,

e.g., Beiter Co. v. Blomquist, 987 F.2d 1319 (8th Cir. 1993)

(finding proximate cause where bribery of council member could have

caused rejection of developer’s development proposal). In

addition, Khurana was a distanced victim of any “illegal

competition;” the state and federal government were more directly

injured. See Rehkop v. Berwick Healthcare Corp., 95 F.3d 285, 289

(3d Cir. 1996) (noting that Medicare and Medicaid programs and

taxpayers are victims of Medicaid/Medicare fraud). As such, the

risk of multiple recoveries indicates an absence of proximate cause

in the same fashion in which it is absent in the case of

shareholders’ RICO claims that are derivative of a corporation.

See Holmes, 503 U.S. at 273; Manson v. Stacescu, 11 F.3d 1127, 1131

(2d Cir. 1993) (finding no “direct relation” because shareholder’s

injury is generally derivative of injury to corporation and thus

not directly related to defendant’s injurious conduct). Khurana

thus lacks § 1964(c) standing for all of his RICO claims premised

on any injuries from “illegal competition.”

D. Loss of Opportunity and Damage to Professional Reputation

as a Result of “Fraudulent Hiring”
13

Khurana’s set of RICO claims based on injuries resulting from

being hired at River Region must be examined under the same

proximate causation requirement. 

1. Loss of Business Opportunities and Damage to

Professional Reputation as a Result of Substantive

RICO Violations

The injuries pleaded by Khurana are denigration to his

professional reputation via the “harmful employment associations”

that resulted from being “fraudulently lured” into his position at

the hospital and the loss of foregone legitimate employment

opportunities. In Sedima, the Court held that the injury relied

on by a plaintiff must be the result of a § 1962 violation. 473

U.S. at 496. The Court explained that for standing based on a §

1962(b) or § 1962(c) violation, a valid RICO injury must

necessarily stem from predicate acts that underpin the § 1962

violation. Id. at 497. The necessary racketeering activities are

those activities catalogued in § 1961(1). Id. at 495. Khurana

contends that the defendants caused him injury by fraudulently

inducing him to accept employment via mail and wire fraud, thereby

damaging his reputation through association with their fraudulent

activities and depriving him of other legitimate business

opportunities. 

a. Professional Reputation Damage

Khurana pleaded injury proximately resulting from the

defendants’ violations of § 1962(b) and § 1962(c) when he asserted

the injury of business reputation harm. For § 1962(b) and §

1962(c) violations, the injurious conduct must be racketeering acts
14

as listed in § 1961(1). According to Khurana’s pleadings, he

detrimentally relied on the appellees’ misrepresentations as to the

legitimacy of the hospital’s operations in taking his position with

the hospital. Such reliance on a predicate fraud act can indicate

the necessary proximate relationship between the injury asserted

and the injurious conduct. See Chisholm v. TransSo. Fin. Corp., 95

F.3d 331, 337 (4th Cir. 1996) (citing cases); Standardbred, 985

F.2d at 104. In Standardbred, the defendants acquired a race track

financed by municipal bonds. In the application for the bonds, the

defendants stated an intent to operate the race track and assured

the plaintiffs of such as well. The defendants subsequently

stopped racing. The Second Circuit held that the plaintiffs had §

1964(c) standing because in the fraudulently induced belief that

the racing would continue, they purchased, relocated and

reconstructed capital equipment for use at the track and designed

their purchases and training of horses with the intent to race them

at the track. Khurana similarly relocated himself and his medical

practice to this hospital, a significant financial and professional

decision, allegedly as a result of the appellees’

misrepresentations as to the legitimacy of the hospital’s

operations.

In addition, the damage to Khurana’s professional reputation

was a foreseeable result of the various racketeering acts of wire

and mail fraud. See discussion supra Part II.C. Khurana, as the

hospital’s director, was essentially the figurehead of a fraudridden, now defunct institution. The act of fraudulently hiring
15

him can be a proximate cause of any damage that his professional

reputation has suffered. Damage to his professional reputation is

easily seen as a natural outgrowth of such an employment

association. As the predicate acts were pleaded as responsible for

Khurana’s acceptance of his employment with River Region, we find

that the pleadings presented the claim of necessary proximate cause

for Khurana’s standing for this claim. See Cox v. Adm’r U.S. Steel

& Carnegie, 17 F.3d 1386, 1399 (11th Cir. 1994) (finding proximate

cause where defendants’ conduct was substantially responsible for

claimed injuries); see also generally Prosser & Keeton on Torts §

41, p. 268 (discussing substantial responsibility and proximate

cause).

b. Legitimate Employment Opportunity

Regarding Khurana’s claimed loss of legitimate business

opportunity, we begin our consideration by noting that RICO civil

standing is not limited to only the immediate victim of a

defendant’s RICO violation. See Zervas v. Faulkner, 861 F.2d 823,

823, 833 (5th Cir. 1988) (“A requirement that the nexus between the

injury and a predicate act be ‘direct’ may . . . be overly

restrictive.”); Mid Atl. Telecom, Inc. v. Long Distance Servs.,

Inc., 18 F.3d 260, 263 (4th Cir. 1994) (rejecting adoption of a

rule that only injuries suffered by the immediate victim of a

predicate act satisfy the “by reason of” requirement of § 1964(c)).

In Mid Atlantic, a plaintiff telephone company accused one of its

competitors of violating RICO by defrauding its customers with

fictitious charges, enabling it to charge lower rates to entice new
16

subscribers. The plaintiff company alleged that it lost revenues

from subscribers who were defrauded into accepting the fraudulent

lower rates of the defendant company. The Fourth Circuit rejected

the argument that the plaintiff company lacked standing because the

customers were the directly injured parties and only they were

proximately injured by its alleged misconduct. Similarly, Khurana

may not have been the intended target of the fraud scheme, but like

the telephone company in Mid Atlantic, he pleaded the loss of a

legitimate business opportunity resulting from the defendants’

alleged racketeering acts. Holmes did not preclude a RICO claim

for “indirect” injuries, but rather instructed the federal courts

to employ common law proximate causation principles. See Israel

Travel, 61 F.3d at 1257. Some indirect RICO injuries, such as this

one, satisfy the proximate causation requirements of common law.

Id. In fact, we have previously rejected a direct versus indirect

injury test as the dispositive standing inquiry for civil RICO

claims. See Ocean Energy II, Inc. v. Alexander & Alexander, Inc.,

868 F.2d 740, 746 (5th Cir. 1989); see also Reynolds v. East Dyer

Dev. Co., 882 F.2d 1249 (7th Cir. 1989) (avoiding using direct

versus indirect terminology to make standing determinations and

instead focusing on causation); Prosser & Keeton on Torts § 42, p.

273-74 (discussing direct versus indirect as only one of several

theories of proximate causation).

In Mid Atlantic, the Fourth Circuit noted that the plaintiff

was not seeking to vindicate the claims of its competitor’s

customers, but rather its own alleged distinct and independent
17

injuries of lost customers and lost revenues. Id. at 264. We

agree with the Fourth Circuit that distinct and independent

injuries are in keeping with the Supreme Court’s understanding of

proximate cause in Holmes. Khurana pleads his own injury of loss

of legitimate employment opportunity. In Holmes, an intervening

event, the insolvency of the securities brokership, broke the

causal link between the plaintiff’s injury and the defendant’s

conduct, 503 U.S. at 262, 264, so that the plaintiff was a

“secondary victim.” Id. at 273. In contrast, the plaintiff in

this case seeks to recover for losses substantially attributable to

the defendants’ conduct. 

Finally, as explained before, the fact that Khurana pleaded

reliance on the defendants’ racketeering acts as a cause of this

injury indicates a valid claim that the racketeering acts

proximately caused him to forego other legitimate business

opportunities. See Chisholm, 95 F.3d at 337; Standardbred, 985

F.2d 102. Khurana claims that he was fraudulently induced to take

his position with the hospital and argues that such proximately

caused him to lose other legitimate business opportunities. As

Khurana’s loss of other employment opportunities was foreseeable by

the defendants and could certainly be anticipated as a natural

consequence of their alleged misrepresentations, Khurana has

sufficiently pleaded that the alleged substantive violations of §

1962(b) and § 1962(c) proximately caused his business opportunity

loss. See Chisholm, 95 F.3d at 337 (relying on plaintiff’s

detrimental reliance on defendants’ material misrepresentations to
 

8 In this section we consider civil standing for a § 1962(d)

violation. Based on our previous discussion in Part II.D.1., we also

recognize that Khurana pleaded proximate cause for § 1962(d) violations

causing reputation damage and business opportunity loss where the § 1962(d)

violations are predicated upon the racketeering acts of wire and mail fraud

already discussed. Accordingly, we also reverse the district court’s

dismissal of Khurana’s claims on that basis, subject to our discussion in

Part III in which we affirm the dismissal of some of Khurana’s claims as

to the corporate defendants.

18

find proximate cause and noting that “[i]n order for the scheme to

succeed, the appellants needed to be convinced that the ‘private

sales’ referenced in the TransSouth notices were

legitimate . . . . concealment of the nature of the ‘private sales’

was the very linchpin of the scheme.”); cf. Shearin v. E.F. Hutton

Group, Inc., 885 F.2d 1162, 1170 (3d Cir. 1989) (affirming the

dismissal of a RICO claim based on a “loss” of the plaintiff’s

former job where there was no allegation that the employer reneged

or the plaintiff was “duped out of her old job”).

. Standing for a § 1962(d)-based Civil RICO Claim for

Loss of Business Opportunity and Damage to

Professional Reputation as a Result of Hiring

Khurana pleaded that the defendants conspired to commit RICO

violations, and in doing so, injured his professional reputation

and caused him a loss of legitimate business opportunity. In

Cullom, we held that a “retaliatory” discharge lacks sufficient

causation for § 1964(c) standing for a substantive RICO violation.

However, Cullom was limited to a causation inquiry and did not

address standing for a RICO civil claim premised on conspiracy

acts, i.e., acts in furtherance of a conspiracy to commit a pattern

of racketeering, a violation of § 1962(d).8

There is a division of circuit authority on the question of
19

whether § 1964(c) civil RICO standing for a § 1962(d) violation may

be premised on injury proximately caused by overt acts in

furtherance of the conspiracy that are not § 1961(1) predicate

acts. See Reddy v. Litton Indus., Inc., 502 U.S. 921, 921, 112 S.

Ct. 332, 332, 116 L. Ed. 2d 272 (1991) (White, J., dissenting from

denial of certiorari and noting circuit split); Bowman v. Western

Auto Supply Co., 985 F.2d 383, 386 (8th Cir. 1993) (collecting

cases). The Third and Seventh Circuits have held that the

injurious acts for § 1964(c) standing for a claim based on a §

1962(d) violation may be racketeering acts as listed in § 1961(1)

as well as overt acts in furtherance of the conspiracy. Schiffels

v. Kemper Fin. Servs., Inc., 978 F.2d 344 (7th Cir. 1992) (adopting

reasoning of Shearin); Shearin v. E.F. Hutton Group, Inc., 885 F.2d

1162 (3d Cir. 1989); see also Gagan v. Am. Cablevision, Inc., 77

F.3d 951, 958-59 (7th Cir. 1996) (reviewing circuit split and

following Schiffels); Rehkop v. Berwick Healthcare Corp., 95 F.3d

285, 290 & n.6 (3rd Cir. 1996) (noting circuit split and applying

Shearin). In contrast, for example, the Second Circuit has held

that because a conspiracy, an agreement to commit predicate acts,

cannot by itself cause any injury and because RICO’s purpose is to

target RICO activities and not other conduct, standing may be

founded only upon injury from overt acts that are also § 1961

predicate acts, and not upon overt acts furthering a RICO

conspiracy. See Terminate Control Corp. v. Horowitz, 28 F.3d 1335,

1344-45 (2d Cir. 1994). 

Section 1962(d) provides that “[i]t shall be unlawful for any
20

person to conspire to violate any of the provisions of subsection

(a), (b), or (c) of this section.” It is well-established that we

must follow a plain meaning statutory interpretation unless a

statutory provision presents an ambiguity or an inconsistency with

a statute’s legislative purposes. United States v. Ron Pair

Enters., Inc., 489 U.S. 235, 242, 109 S. Ct. 1026, 1030, 103 L. Ed.

2d 290 (1989). Like the Seventh Circuit, we refuse to place “a

limitation on RICO standing that RICO itself does not impose.” See

Schiffels, 978 F.2d at 346. Since § 1962(d) does not require that

a predicate racketeering act actually be committed, it follows that

the act causing a § 1964(c) claimant’s injury need not be a

predicate act of racketeering. A person injured by an overt act in

furtherance of a RICO conspiracy has been injured by reason of the

conspiracy, and thus has § 1964(c) standing. See Id. at 349. To

interpret otherwise would ignore § 1964(c)’s provision for civil

liability for, inter alia, a violation of § 1962(d) that

proximately injures a person’s property or business. Buttressing

this position is the Supreme Court’s and Congress’s direction that

“RICO is to be read broadly” and “‘liberally construed to

effectuate its remedial purpose.’” Sedima, 473 U.S. at 497-98

(quoting Pub. L. No. 91-452, § 904(a), 84 Stat. 947). 

In addition, while the Second Circuit noted that RICO was

designed to combat substantive violations, Hecht v. Commerce

Clearing House, Inc., 897 F.2d 21, 25 (2d Cir. 1990), the provision

for conspiracy violations was part and parcel of Congress’s intent

and plan and cannot be ignored. See Sedima, 473 U.S. at 499
21

(noting that although RICO used in ways not originally envisioned,

Congress and not the courts must amend statute). 

Having determined that Khurana’s standing is not precluded by

the necessity of causative racketeering acts, we must consider

whether his pleading sufficiently alleges proximate causation for

§ 1964(c) standing premised on an underlying § 1962(d) violation.

In Shearin, the Third Circuit held that the plaintiff’s hiring

as window dressing and firing to preserve the fraud both qualified

as conspiracy acts for a § 1962(d)-based civil claim. 

Shearin’s hiring and firing plausibly constitute

overt acts that not only would establish a

conspiracy, but in this case were allegedly

essential to it. Assuming that the hiring and

firing were injuries, those injuries did occur “by

reason of” Hutton’s violation of section 1962(d).

885 F.2d at 1168-69. Similar facts are presented here. Hiring

Khurana allegedly allowed the defendants to pose as a medical

facility qualifying for federal funds, which allowed them to

fraudulently obtain Medicare and Medicaid reimbursement. As in

Shearin, it appears that the hiring of Khurana was an overt act

critical to the conspiracy. As the hiring of Khurana was an

alleged predicate conspiracy act, any lost opportunity for

legitimate employment and damage to professional reputation

“flowed” from RICO predicate acts, see Cullom, 859 F.2d at 1215,

and Khurana has pleaded the necessary proximate cause for his claim

of hiring injuries based on a § 1962(d) violation. Khurana thus has

cleared, from a pleading standpoint, the proximate cause hurdle for

standing for these claims.

E. Standing for a § 1962(d)-based Civil Claim for
22

Termination Injuries

We explained earlier that Khurana does not have standing under

§ 1964(c) to pursue a § 1962(b) or § 1962(c) claim for termination

injuries. However, he may have § 1964(c) standing to pursue a

claim for termination injuries as a result of an act in furtherance

of a conspiracy. RICO racketeering acts as well as acts in

furtherance of a RICO conspiracy may provide standing to sue for

civil conspiracy claims if they are the proximate cause of an

injury. 

Khurana alleged that he was discharged from his position as

Medical Director in furtherance of the appellees’ scheme of

Medicaid fraud. “The discharge was intended to remove Plaintiff

from continuing to have access to information about defendants and

to intimidate him to hinder and prevent his testimony as a witness

in future proceeding,” “to eliminate his access to information

concerning the defendants’ illegal activities” and was an act “to

maintain control of and conduct” the enterprise. In addition, and

probably most importantly, Khurana alleges that terminating him had

the effect of rescinding Khurana’s order of ten days previous in

which Khurana suspended the admission to the hospital of illegal

Medicaid patients. Khurana alleges that he was terminated so that

the defendants could “continu[e] their illegal procurement of

Medicaid and Medicare funds and minimiz[e] impediments thereto.”

As such, Khurana has presented the necessary proximate causation

for standing to pursue his claim for termination injuries because

the termination was an alleged overt act in furtherance of the
23

alleged RICO conspiracy. Such an allegation presents sufficient

causation to confer standing. See Rehkop, 95 F.3d at 290-91

(holding that the plaintiff’s termination constituted an overt act

in furtherance of an alleged conspiracy and thus the plaintiff had

RICO standing); Schiffels, 978 F.2d at 350-51 (holding that a

plaintiff-employee may have RICO standing when he alleges that he

was fired in an attempt to prevent him from causing the conspiracy

to unravel by disclosing scheme); Shearin, 885 F.2d at 1170

(holding that allegation that plaintiff was fired in furtherance of

a conspiracy in violation of § 1962(d) stated a claim for relief

under § 1964(c)); White v. Hall, 683 F. Supp. 639, 642 (E.D. Ky.

1988) (finding civil RICO standing for discharged employee for

alleged § 1962(d) violation where the plaintiff alleged that part

of conspiracy was to cover up illegalities by terminating employees

refusing to participate in schemes). 

III. The Enterprise-Person Distinction for a § 1962(c)

Violation

Khurana also contends that the district court erred in

dismissing his claims under 18 U.S.C. § 1962(c) and § 1962(d) (to

the extent involving a conspiracy to violate § 1962(c)) for failure

to plead a RICO enterprise which is separate and distinct from the

RICO person referenced in § 1962(c).

We must consider this contention in relation to Khurana’s

remaining § 1962(c) claims. The remaining § 1962(d) claims must

also be considered in relation to this issue to the extent that

they are based on a conspiracy to commit a § 1962(c) violation.

Ashe v. Corley, 992 F.2d 540, 544 (5th Cir. 1993). Section 1962(c)
24

provides that 

[i]t shall be 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.

18 U.S.C. § 1962(c). The statutory definition of enterprise

includes “any individual, partnership, corporation, association, or

other alleged legal entity, and any union or group of individuals

associated in fact although not a legal entity.” 18 U.S.C. §

1961(4). Khurana alleged that the enterprise is an association-infact of all five defendants (the three individuals and the two

corporate entities). 

The district court dismissed Khurana’s claims that were

bottomed on § 1962(c) on the alternative basis (from the dismissal

on the basis of standing) that Khurana failed to plead a RICO

defendant that was distinct from the enterprise in his § 1962(c)-

premised claim and his claim based on a conspiracy to commit a §

1962(c) violation in violation of § 1962(d).

For purposes of a claim based on § 1962(c), RICO persons

associated with or employed by an enterprise must be distinct from

the RICO “enterprise.” Crowe v. Henry, 43 F.3d 198, 205-06 (5th

Cir. 1995). Section 1962(c) imposes liability on an employee or

associate of an enterprise conducting affairs of the enterprise

through a pattern of racketeering activity and, logically, such an

individual cannot employ or associate with itself. See, e.g.,

Ashe, 992 F.2d at 544. Accordingly, some of Khurana’s claims that
25

are based on 18 U.S.C. § 1962(c) fail because his pleadings do not

contain a sufficient distinction between the persons who allegedly

committed the unlawful acts and the enterprise with which they are

employed or associated. 

Khurana has failed to plead a corporate defendant distinct

from the enterprise in that the association-in-fact enterprise that

he pleaded is in reality a “stand-in,” or another name, for the

corporate entity. See Riverwoods Chappaqua Corp. v. Marine Midland

Bank, N.A., 30 F.3d 339, 344 (2d Cir. 1994). By alleging as a RICO

enterprise a group consisting solely of a bank and several of its

employees, the plaintiffs in Riverwoods Chappaqua effectively

identified the RICO enterprise as the corporate defendant. The

distinctiveness requirement may not be avoided

by alleging a RICO enterprise that consists merely

of a corporation defendant associated with its own

employees or agents carrying on the regular affairs

of the defendants . . . . Where employees of a

corporation associate together to commit a pattern

of predicate acts in the course of their employment

and on behalf of the corporation, the employees in

association with the corporation do not form an

enterprise distinct from the corporation.

Id. While it is theoretically possible for a corporation to play

a separate active role in RICO violations committed by its

employees and agents, see Securitron Magnalock Corp. v. Schnabolk,

65 F.3d 256, 263 (2d Cir. 1995), cert. denied, — U.S. —, 116 S. Ct.

916, 133 L. Ed. 2d 846 (1996); Brittingham v. Mobil Corp., 943 F.2d

297, 302 (3d Cir. 1991); Petro-Tech, Inc. v. Western Co. of No.

Am., 824 F.2d 1349, 1361 (3d Cir. 1987), when the alleged

association-in-fact entity is in reality no different from the
26

association of individuals or entities that constitute a defendant

“person” and carry out its activities, the distinctiveness

requirement is not met in regard to that defendant. See Parker &

Parsley Petroleum v. Dresser Indus., 972 F.2d 580, 583-84 & n.3

(5th Cir. 1992) (finding an association-in-fact of employees of

corporation to be the defendant corporate entity functioning

through its employees in the course of their employment); Glessner

v. Kenny, 952 F.2d 702, 712 (3d Cir. 1991); Brittingham, 943 F.2d

at 302 (“Without allegations or evidence that the defendant

corporation had a role in the racketeering activity that was

distinct from the undertaking of those acting on its behalf, the

distinctiveness requirement is not satisfied.”). Khurana has not

alleged that defendants River Region Hospital or Innovative had any

active role in the activities of its affiliated entity, employees

or officers. See Glessner, 952 F.2d at 712 & n.10. In fact,

Khurana alleged the exact opposite, terming the corporate entities

“passive instruments” in his complaint. 

In addition, the distinctiveness requirement is not satisfied

by pleading a subsidiary corporation or affiliated entity as a

perpetrator-defendant if the parent corporation and the

subsidiary’s roles in the alleged racketeering activities are not

sufficiently distinct. Discon, Inc. v. Nynex Corp., 93 F.3d 1055,

1063-64 (2d Cir. 1996) (distinctiveness requirement not satisfied

where three corporate defendants that constituted alleged

enterprise, although legally separate, “operated within a unified

corporate structure” and were “guided by a single corporate
27

consciousness”), cert. denied, — U.S. —, 118 S. Ct. 49, — L. Ed. 2d

— (1997); Compagnie De Reassurance D’Ile de France v. New England

Reins. Corp., 57 F.3d 56 (1st Cir. 1995); Lorenz v. CSX Corp., 1

F.3d 1406, 1412 (3d Cir. 1993) (“A RICO claim under § 1962(c) is

not stated where the subsidiary merely acts on behalf of, or to the

benefit of, its parent.”); Chamberlain Mfg. Corp. v. Maremont

Corp., 919 F. Supp. 1150, 1154-58 (N.D. Ill. 1996)(holding that

where enterprise was an association-in-fact of the parent

corporation and its subsidiary, it lacked its own distinct legal

identity for purposes of § 1962(c)). In this case, Khurana did not

plead any distinct roles for the subsidiary River Region and the

parent corporation Innovative so that they might be regarded as

having any distinctiveness from the alleged enterprise. “We would

not take seriously . . . an assertion that a defendant could

conspire with his right arm, which held, aimed and fired the fatal

weapon.” United States v. Computer Sciences Corp., 689 F.2d 1181,

1190 (4th Cir. 1982). As the association-in-fact pleaded by

Khurana is in reality the corporate entity, we must affirm the

district court as to its dismissal of these claims against the

corporate entities as the distinctiveness requirement is not met in

relation to these two defendants. River Region and Innovative

cannot simultaneously be both the enterprise and the named

defendants. See Securitron, 65 F.3d at 263. Therefore, we

conclude that Khurana’s attempt to circumvent the distinction

requirement in regard to the corporate defendants by pleading an

association-in-fact theory must be rejected.
28

We must also consider the claims in relation to the other

named defendants, the officers and employees of the two corporate

entities. See, e.g, Banks v. Wolk, 918 F.2d 418, 424 (3d Cir.

1990) (leaving RICO action intact against certain individual

defendants while dismissing the corporate defendant for failure to

withstand distinctiveness requirement); Kehr Packages, Inc. v.

Fidelcor, Inc., 926 F.2d 1406, 1411 (3d Cir. 1991) (considering

§ 1962(c) claim separately for each defendant’s fulfillment of

distinctiveness and other requirements). As we explained above,

Khurana’s complaint essentially pleads the corporation as the

enterprise. Section 1962(c) may impose liability on individual

corporate officers and employees who conduct the corporate

enterprise which employs them through a pattern of racketeering

activity. See Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., 46

F.3d 258, 266-269 (3d Cir. 1995); United States v. Robinson, 8 F.3d

398, 407 (7th Cir. 1993); Sever v. Alaska Pulp Corp., 978 F.2d

1529, 1534 (9th Cir. 1992); Ashland Oil, Inc. v. Arnett, 875 F.2d

1271, 1280 (7th Cir. 1989); McCullough v. Suter, 757 F.2d 142, 144

(7th Cir. 1985); see also Securitron, 65 F.3d at 263. Accordingly,

we reverse the dismissal of the remaining § 1962(c)-related claims

against the three individual defendants.

CONCLUSION

For the foregoing reasons, we REVERSE in part and AFFIRM in

part. We affirm the district court’s dismissal of Khurana’s claims

based on alleged violations of § 1962(c) and § 1962(d) (to the

extent they allege conspiracy to violate § 1962(c)) against the two
 

9 Our reversal of the dismissal of these claims is not meant to

express any opinion as to other issues related to these claims which the

district court may address on remand. Given that the parties did not brief

any other issues to the district court and that only the appellant briefed

the properness of his pleadings of RICO violations, we have concerned

ourselves only with the district court’s legal conclusions supporting its

dismissal of Khurana’s RICO claims, namely the issues of proximate

causation for his standing and the necessary distinctiveness for the §

1962(c)-related claims. We leave any other issues or challenges for the

district court’s consideration in the first instance. See Youmons v.

Simon, 791 F.2d 341, 348 (5th Cir. 1986) (declining to consider challenges

to the particularity with which mail and wire fraud allegations were

pleaded in a RICO claim, preferring to remand to district court because the

district court did not consider such challenges); Morosani v. First Nat’l

Bank of Atlanta, 703 F.2d 1220, 1222 (11th Cir. 1983) (refusing to decide

at interlocutory appeal stage theories for dismissing RICO claims that were

not decided by district court, preferring to remand theories for district

court to address in first instance).

29

corporate defendants. We also affirm the district court’s

dismissal of all claims alleging injury from “illegal competition.”

Additionally, we affirm the district court’s dismissal of Khurana’s

claims alleging termination injuries as a result of § 1962(b) and

§ 1962(c) violations. We reverse the district court’s dismissal of

all other claims with directions to reinstate them for further

proceedings consistent with this opinion.9