- 19 -

jurisdiction over the state law claims and remand the case to state

court.

Conclusion

For the reasons stated above, we dismiss the RICO claims,
decline to exercise supplemental jurisdiction over the state law

claims, and remand the case to the Circuit Court of Cook County.

DATE: Marc T2001 —€sc
ENTER: nh
John F./Grafy, United States District Judge

f



- 13 -
plaintiff shows that “the defendant [] conducted or participated in
the conduct of the ‘enterprise’s affairs,’ not just their own
affairs.” Reves, 507 U.S. at 185 (emphasis in original). The
Supreme Court has held that the verb “conduct” requires some degree
of direction over the enterprise’s activities, and the word
“participates” requires some part in that direction. Id. at 177.
To put it another way, the plaintiff must show that the parent
corporation “somehow made it easier to commit or conceal the fraud

of which the plaintiff complains.” Brannon v. Boatmen’s First Nat.

Bank of Oklahoma, 153 F.3d 1144, 1147-48 (10th Cir. 1998) (quoting
from Emery, 134 F.3d at 1324, and discussing Seventh Circuit case
law in detail).

We turn, then, to the plaintiff's complaint in search of
allegations that Sprint Spectrum participated in the operation of
the enterprise, Sprint Corporation. According to the complaint,
the mail fraud was conducted entirely by Sprint Spectrum. It
devised the inaccurate method for ascertaining whether a customer
resides within city boundaries for purposes of determining
liability for the local tax; it knew that the method misidentified
thousands of consumers; and it prepared and filed tax returns with
the appropriate municipalities. Compl. pp. 3-5. As to the key act
of mail fraud, the complaint is crystal clear that it was Sprint

Spectrum that processed and sent out incorrect billing statements:


-4-

“racketeering activity” which brings the statute into play. See 18
U.S.C. 1961(1)(B). The defendants argue, among other things, that
the charge based on § 1962(a) must be dismissed for lack of
standing; the § 1962(c) charge must be dismissed for failure to
allege a RICO “person” separate and distinct from the RICO
“enterprise”; and the § 1962(d) claim for conspiracy must be
dismissed because it depends on the § 1962(a) and (c) claims,
neither of which is viable.

1. Section 1962 (a)

That plaintiff alleges that the defendants violated section
1962(a), which states, in pertinent part:

It shall be unlawful for any person who has received any

income derived, directly or indirectly, froma pattern of

racketeering activity ... to use or invest, directly or

indirectly, any part of such income, or the proceeds of

such income, in acquisition of any interest in, or the

establishment or operation of, any enterprise which is

engaged in, or the activities of which affect, interstate

or foreign commerce....
The private right of action to enforce this section of RICO is
found in § 1964(c). Persons must show they were “injured by reason

of” a violation of § 1962 to have standing to bring a civil suit.?

See Fogie v. THORN Americas Inc., 190 F.3d 889 (8th Cir. 1999

(affirming district court’s dismissal of § 1962(a) claim because

2/ “(c) 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 a reasonable attorney’s fee....”


~17-
the enterprise’s affairs, then we could simply assume, as Haroco
did, that subsidiaries conduct the affairs of their parent
corporations. See Haroco, 747 F.2d at 402-03. However, Fitzgerald
clearly stated that Haroco had been limited by the Supreme Court in
that respect. Fitzgerald, 116 F.3d at 227 (stating that Reves
imposed the requirement that the subsidiary participate in the
control the parent).
We agree with Brannon’s analysis, and find that the plaintiff
has failed to plead facts which satisfy the requirement of §
1962(c) that Sprint Spectrum participated in conducting the affairs

of the enterprise, rather than simply its own affairs.

3. Section 1962 (d)

Section 1962(d) makes it unlawful for “any person to conspire
to violate any of the provisions of subsection (a), (b), or (c) of
this section.” Therefore, in order to state a violation of
subsection (d) for conspiracy to violate subsection (a), (b), or
{c), the plaintiff must establish that the defendants violated (or
were intending to violate) one of those subsections. Because we
have found deficient the plaintiff’s claims that the defendants

violated RICO subsections (a) and (c)*, we dismiss the § 1962 (da)

% To conspire to violate subsection (c) the defendant must “facilitate

the activities of the operators or managers to whom subsection (c) applies. one

must knowingly agree to perform services of a kind which facilitate the


~9-

The plaintiff identifies Sprint Spectrum as the RICO person!

and Sprint Corporation as the enterprise.’ The defendants argue
that the alleged RICO person is not sufficiently separate and
distinct from the enterprise because the person is the wholly owned
subsidiary of the enterprise. They cite three Seventh Circuit
cases which declined to extend RICO liability under § 1962(c) to
circumstances where the RICO person and enterprise consisted of
different divisions or subsidiaries of the same corporation. See

Emery v. American Gen. Fin., Inc., 134 F.3d 1321, 1323-24 (7th Cir.

1998) (stating that it is not enough that the predicate acts “were
committed by a firm that has agents or affiliates”); Fitzgerald v.
Chrysler Corp., 116 F.3d 225, 227 (7th Cir. 1997) (liability could
not flow where the “person” was the parent corporation, Chrysler,
and the “enterprise” consisted of the parent corporation, its
subsidiaries, and agents); Richmond, 52 F.3d at 646 (the plaintiff

did not state a claim where the RICO acts began and ended with the

¥ Under RICO, a “person” need not be a natural person. 18 U.S.C. §
1961(3); Fitzgerald v. Chrysler Corp., 116 F.3d 225, 226 (7th Cir. 1997) (noting
that Chrysler is person within the meaning of the Act).

8/ The complaint could be read to allege that Sprint Corporation is also

a RICO person and enterprise. However, the plaintiff did not argue this in his
Response, perhaps because Seventh Circuit case law clearly disallows a corporate
parent to function both as the RICO person and the enterprise. See infra A,2.
Since the plaintiff has not raised this issue, we will not address it separately.

The plaintiff also pled that the RICO enterprise consisted of Sprint
Corporation along with “various individuals, partners, corporate officers, board
of directors and employees” of Sprint. He does not mention these individuals in
his Response and we do not believe inclusion of these persons would alter the
inquiry or the result.


-6-
Circuits and noting that only the Fourth Circuit disagrees); see

also Chamberlain, 1993 WL 535420 at *12 & n. 8 (noting that in the

Northern District of Illinois the majority approach is to require
an injury from the use of racketeering funds).

We are persuaded that the prevailing opinion is correct for
two reasons. Section 1962(a) does not itself prohibit the
predicate acts forming the basis of “racketeering.” It imposes
liability for certain uses of income derived from racketeering
activities. To state a claim that one has been “injured by reason
of” a violation of § 1962(a), therefore, one must show that the
injury flowed from the prohibited use of racket derived income.
See Fogie, 190 F.3d at 895. The Fogie court articulated another
reason: to permit liability for predicate acts under § 1962 (a)
would unleash “almost unlimited civil liability” and, therefore,
render meaningless the limited prohibitions found in § 1962 (c)
Id. at 895-96.

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 ina 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.” [Citations omitted

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


-5-
the plaintiff had no standing). The defendant argues that the
plaintiff does not have standing to bring a § 1962(a) claim because
he has not alleged any injury from the “use” or “investment” of
racketeering income, but only an injury from the predicate offense
of mail fraud. The plaintiff agrees that the injuries he claims
“are a direct result of the predicate offenses by defendants.”
Response at 6.

The only question, then, is whether the plaintiff states a
claim under § 1962(a) when the only alleged injuries arise out of
the predicate offense alone, or whether the plaintiff must allege
a separate injury resulting from the use of the racket-derived
income. The Seventh Circuit has not decided the issue, and the
judges in this district are split, see Chamberlain Mfg. Corp. v.
Maremont Corp., No. 90 C 7127, 1993 WL 535420 at *12 &n. 8 (N.D.
Ill. Dec. 19, 1993) (listing cases in this district which have
considered the question), as are the other circuits. See Fogie
190 F.3d at 894 (collecting cases). However, the majority view is
that an injury resulting solely from the predicate offense is
insufficient, with eight of the nine circuit courts to consider the
question holding that “§§ 1962(a) and 1964(c) limit standing only
to plaintiffs who have suffered injury from the use or investment
of the racketeering income.” Fogie, 190 F.3d at 894-95 (listing

cases from the Second, Third, Fifth, Sixth, Ninth, Tenth, and D.c.


- 18 -

claim, as well. See Lighting Lube, Inc. v. Witco Corp., 4 F.3d

1153, 1191 (3d Cir. 1993) (“any claim under section 1962(d) based
on a conspiracy to violate the other subsections of section 1962
necessarily must fail if the substantive claims are themselves

deficient.”).

B. State Law Claims

The plaintiff's remaining claims are all based on state law.
This court’s original jurisdiction over the case was based on the
federal question presented by the plaintiff’s RICO claims. Because
we have dismissed the RICO claims, we may decline to exercise
supplemental jurisdiction over the state law claims. See 28 U.S.C.

§ 1367 (c) (3); Richards v. Combined Ins. Co. of America, 55 F.3d

247, 253 (7th Cir. 1995) (affirming district court’s dismissal of
supplemental state claims when RICO claim was dismissed). As we
have not devoted time or resources to the state law claims, no
judicial economy would result from retaining jurisdiction over

those claims. Therefore, we exercise our discretion to decline

activities of those who are operating the enterprise in an illegal manner.
Brouwer _v. Raffensperger, Hughes & Co., 199 F.3d 961, 967 (7th Cir.), cert.
denied, 120 §.Ct. 2688 (2000) (emphasis added) (also stating that “one cannot
conspire to violate subsection (c) by agreeing that somehow an enterprise should
be operated or managed by someone.”) As pointed out above, the plaintiff has
failed to allege that any operator participated in the affairs of any enterprise.



-~B-
alleges no injury resulting from the use of racket-derived income,

we hold that he has not stated a claim under § 1962(a).

2. Section 1962 (c)

The plaintiff’s second claim is brought under § 1962(c), which
makes it unlawful

for any person employed by or associated with any

enterprise ... to conduct or participate, directly or

indirectly, in the conduct of such enterprise’s affairs

though a pattern of racketeering activity or collection

of unlawful debt.
18 U.S.C. § 1962(c). It is well-settled that under § 1962(c) the
RICO “‘person’ must participate in the operation or management of
the enterprise itself ... and must be separate and distinct from
the enterprise.” Richmond v. Nationwide Cassel, L.P., 52 F.3d 640,
646 (7th Cir. 1995) (citing cases). Moreover, when the RICO person
conducts his own affairs through a pattern of racketeering
activity, there is no enterprise and no liability under § 1962(c).
Id. (affirming dismissal of complaint where the plaintiff failed to

show how the “persons” conducted the affairs of either of the

alleged enterprises rather than their own).

the use of racket-derived income must be separate and distinct from the injuries
caused by the predicate acts. 190 F.3d at 896. If it were otherwise,
corporations would always be liable for the predicate acts themselves, because
over the long-term corporations generally reinvest their profits. Id.


Dates

United States District Court, Northern District of Ilinois

lame of Assigned Judge Sitting Judge if Other
Mi or Magistrate Judge Jobn F. Grady than Assigned Judge
CASE NUMBER 00 C 6560 DATE March 8, 2001
CASE Emery et al v. Sprint Spectrum & Sprint Corp.
TITLE
Un the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the

MOTION: nature of the motion being presented.)

DOCKET ENTRY:

() oO Filed motion of [ use listing in “Motion” box above.]

(2) a Brief in support of motion due

(3) ga Answer brief to motion due . Reply to answer brief due :

(4) Oo Ruling/Hearing on set for at

(5) qo Status hearing[held/continued to] [set for/re-set for] on set for at

(6) Oo Pretrial conference[held/continued to] [set for/re-set for] on set for at .

(7) Oo Trial[set for/re-set for] on at

(8) a [Bench/Jury trial] [Hearing] held/continued to at

(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

CUFRCP4(m) O General Rule2i O FRCP41(a)(1) O FRCP41(a)(2).

(10) , | {Other docket entry] Defendant’s motion to dismiss all counts of
complaint [5-1] is granted as to the plaintiff’s RICO claims. The
court declines tO exercise supplemental jurisdiction over the state
law claims and remands the case to the Circuit Court of Cook County.
ENTER MEMORANDUM OPINION.

(il) x [For further detail see order (on reverse side of/attached to) the original minute order.]

No notices required, advised in open court.
No notices required. umber of novices i
Notices MAILED by judge’s staff.
x MAR 4.2 2oeh{
Notified counsel by telephone. te dockets
Docketing to mail notices. |
Mail AO 450 form. Zl pay ina j
_ (
date maited notice
courtroom wb iia
KAM deputy’s ° KAM
initials Date/time received in
central Clerk's Office mailing deputy initials

(Reserved for use by the Court


- 11 -

defendants point to must be taken in the context of the facts
presented: the RICO person was the parent corporation, and the RICO
enterprise was the parent corporation together with its
subsidiaries and agents. Power over the subsidiary is inherent in
a corporate parent’s relationship with its wholly owned subsidiary.
Emery, 134 F.3d at 1324. The situation presented in this case
differs from Haroco because a subsidiary does not control the
parent: “the problem with parent-person and subsidiary-enterprise
pleading is that subsidiaries conduct the affairs of their parent

not vice versa.” Majchrowski v. Norwest Mortgage Inc., 6 F.

Supp. 2d 946, 956 (N.D. Ill. 1998) (discussing Emery and

Fitzgerald); see also Williams v. Ford Motor Co., 11 F. Supp.2d

983, 988 (N.D. Ill. 1998) (reading the Richmond-Pitzgerald-Emery
line of cases narrowly and finding that they apply in the specific
situation where the RICO person is the parent or umbrella corporate
entity).

Moreover, the three recent Seventh Circuit cases specifically
discussed or cited Haroco. Indeed, Fitzgerald discussed Haroco as
presenting circumstances coming close to the RICO paradigm, for
example, where

the criminal seizes control of a subsidiary of a

corporation and perverts the subsidiary into a criminal

enterprise that manages in turn to wrest sufficient

control or influence over the parent corporation to use
it to commit criminal acts ... Our decision in Haroco


- 10 -
alleged RICO “persons” -- parent and partial subsidiary -- and no
enterprise beyond them was properly alleged) . They also quote

Bachman v. Bear, Stearns & Co., for the proposition that a “firm

and its employees, or a parent and its subsidiaries, are not an
enterprise separate from the firm itself.” 178 F.3d 930, 932 (7th
Cir. 1999) .°

However, an earlier Seventh Circuit decision did recognize a
subsidiary as the RICO person and the parent corporation as the
enterprise. See Haroco, 747 F.2d at 402. In that case, the
complaint alleged that a subsidiary had violated § 1962(c) by
conducting the affairs of its parent corporation through a pattern
of racketeering activity. Id. Noting particularly that a
subsidiary corporation is “certainly a legal entity distinct from
its parent,” the Court concluded that the plaintiff stated a claim
under § 1962(c). Id.

The defendants acknowledge Haroco as a snag in their case, but
maintain that the more recent statements in Fitzgerald and Emery
represent a change in the Seventh Circuit’s position since Haroco.

We believe the defendants paint with too broad a stroke. The cases

‘/ The Court made this statement in the context of explaining why it
discussed the role of the CEO and Vice President of the corporations without
mentioning the corporations themselves: “To add the corporations to Snyder and
Ferrell, their employees, is thus to add nothing.” Bachman, 178 F.3d at 932.
Ultimately, the Court determined that the corporations at issue were enterprises,
but that the defendant did not exercise any control over the corporations. Id.
at 932-33,


-7-
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 plaintiff does not address this case law at all, much less
urge us to adopt the minority view. Instead, he cites Haroco v.

American Nat’] Bank & Trust Co. of Chicago for the proposition that

the Seventh Circuit has upheld civil RICO claims where “the only
apparent injuries were those directly resulting from the predicate
offense.” 747 F.2d 384, 397 (7th Cir. 1984), aff'd on other
grounds by 473 U.S. 606 (1985). This argument is without merit.
Haroco considered liability under subsection (c) of § 1962 only,
specifically excluding from discussion the provisions of subsection
(a). Id. at 387. Moreover, ten years after Haroco was decided,
the Seventh Circuit stated in Vicom, Inc. v. Harbridge Merchant
Serv., Inc., 20 F.3d 771, 779 n. 6 (7th Cir. 1994), that it had yet
to consider whether an injury from the predicate act alone is
sufficient to state a claim under § 1962(a).

As pointed out previously, the plaintiff acknowledges that his

alleged injuries resulted from the predicate acts. Because he

2 The complaint contains the allegation that “[d]efendant invested money
in the enterprise with the intent and purpose of furthering the racketeering
activities of the enterprise. Defendant received revenues from the enterprise
which were acquired from the enterprises [sic] pattern of racketeering activity.”
Compl., pp. 20, 21. The plaintiff does not argue that this is sufficient to meet
the “income use” test articulated above, nor indeed do we believe such an
argument would help his case. As the Fogie court pointed out, the injury from


~3-
though he resided outside the Aurora city limits and owed no tax.
He further alleges that Sprint Spectrum knew that its methodology
produced inaccurate results and caused the misidentification of
thousands of customers, but it did not correct the problem, alert
consumers to the problem, or refund all of the improperly collected
taxes. Moreover, Sprint Spectrum inserted a forfeiture clause into
its contract for services that allows it to retain money collected
from a billing error if the customer does not protest the incorrect
charges within 30 days of receiving the bill. Sprint Spectrum has
asserted this clause as a defense to legal proceedings and to class
complaints brought to its customer service department. According
to the plaintiff, these acts add up to mail fraud because Sprint
Spectrum processed and mailed billing statements with false charges
to customers over a period of two years.

Because the racketeering charges are based on the Racketeer
Influenced and Corrupt Organizations (“RICO”) statute, 18 U.S.C. §
1961, et _seg., the defendants removed the case to this court. This

motion to dismiss all counts followed.

Analysis

A. Count I: Racketeering

Alleging violations of sections 1962(a), (c), and (ad) of RICO,

the plaintiff identifies the offense of mail fraud as the predicate


-14-

Sprint Spectrum, L.P. bills and collects these charges

for mobile phone services provided consumers through its

centralized computer systems operated and maintained by

Spring Spectrum, L.P., its officers and employees at its

corporate headquarters in Missouri and through contracts

with third party vendors negotiated, entered into and

maintained by Sprint Spectrum, L.P. its officers and

employees.
Id. at 2 (emphasis added). Also, the contract for service appears
to be between Sprint Spectrum and the customer. See Compl., pp. 17-
18, and appended contract. There is no mention of Sprint
Corporation in the contract. According to the complaint, Sprint
Spectrum inserted a forfeiture clause into the contract, and it was
Sprint Spectrum’s customer service department that used the clause
as a defense to complaints brought to its attention.

The plaintiff argues that it is sufficient that Sprint
Corporation delegated its wireless services business to Sprint
Spectrum’ and that the racketeering activity financed the corporate

group’s operations. Response, at 6, 7. Similar circumstances were

presented in Brannon v. Boatmen’s First Nat. Bank of Oklahoma,

where the plaintiff alleged that a bank holding company,
Bancshares, had delegated responsibility to its subsidiary,

Boatmen’s, for servicing certain consumer credit obligations, and

/ The plaintiff also states in his brief that Sprint Spectrum “took
control of wireless services aspect of parent's business,” but the complaint
alleges a different locus of control: “Sprint Spectrum, L.P. was formed by Sprint
Corporation to implement and carry out its strategy to provide wireless
communication services to the public and businesses.” Compl. p. 12.


- 16 -
plaintiff's “claim begins and ends with the fraud allegedly

committed by” the RICO persons).

The plaintiff directs our attention to Majichrowski_ v. Norwest

Mortgage Inc., 6 F. Supp.2d 946, a case which presented
allegations similar to those presented in Brannon and here. In

that case, Judge Castillo reached the opposite conclusion from
Brannon and held that the plaintiff survived the motion to dismiss,
but he did so with marked reservation:

[T]he case before us comes dangerously close to what

Fitzgerald might characterize as an “absurd application”

of the RICO statute. It requires us to equate exercising

delegated authority that produces some financial benefit

to affiliated corporate entities with directing those

companies’ affairs. This is a logical stretch, to say

the least. In addition, we are troubled by the insertion

of RICO claims into what would otherwise be a garden-

variety breach-of-contract or (perhaps) fraud case.
Id. at 961. We appreciate Majchrowski’s careful analysis, but we
are persuaded more by the court’s misgivings than by its ultimate
holding. As the Brannon court put it: the fact that a parent
corporation benefits financially from the success of its subsidiary
simply “define[s] a legitimate corporate and financial relationship
between” a subsidiary and parent, and is a fact that “on its own is
unrelated to RICO liability.” Brannon, 153 F.3d at 1148-49. Parent
corporations usually benefit financially from the success of their

subsidiaries. If this alone were sufficient to meet the

requirement that the RICO person “participate in the conduct” of


~2-
reimbursement for unlawful charges under the “money had and
received” doctrine.

The following facts, drawn from the plaintiff’s Second Amended
Complaint (“complaint”), are taken as true for the purposes of this
motion. Defendant Sprint Corporation provides wire line
telecommunication services to consumers throughout the United
States, and it’s wholly owned subsidiary, defendant Sprint
Spectrum, operating under the trade name “Sprint PCS,” provides
mobile phone services. Thirty-eight states permit their
municipalities to charge a local tax! on the revenue generated by
the sale of mobile phone services to consumers. To identify
whether a customer owes local taxes, Sprint Spectrum looks at the
customer's zip code to ascertain whether the billing addresses fall
within the geographical boundaries of the municipality. Some
municipalities allow Sprint Spectrum to retain an administration
fee for collecting the local taxes, usually about 2% of the taxes
collected.

The plaintiff alleges that Sprint Spectrum’s methodology for
identifying city-residents was so flawed that as many as 25% of its
customers were billed for and paid local taxes that they did not

owe. The plaintiff himself was charged Aurora city taxes even

¥/ These taxes may include “local utility, and/or sales tax, and/or
municipal infrastructure tax, and/or local general receipts taxes, and/or
transaction privilege tax or other local taxes.” Complaint, pp. 2-3.


00-6560.011-MEV . March 8, 2001

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

RICHARD EMERY, individually and on
behalf of all the members of the
class of persons similarly
situated,

Plaintiff,
v. No. 00 C 6560
SPRINT SPECTRUM L.P., a foreign

corporation, and SPRINT

)
)
)
)
)
)
)
)
)
)
)
CORPORATION, a foreign corporation, )
)
)

DOCKET ED

Defendants.
MAR 1 3 ao9y
MEMORANDUM OPINION

Before the court is defendants’ motion to dismiss all counts
of plaintiff's complaint. For the reasons explained below, the
motion is granted as to the plaintiff's RICO claims, and the case

is remanded to the Circuit Court of Cook County.

Background

The plaintiff, Richard Emery, brought this class action
lawsuit in state court against the defendants, Sprint Spectrum
L.P., and its parent corporation, Sprint Corporation, alleging

racketeering, breach of contract and consumer fraud, and seeking

{/


-12-
allowed the subsidiary to be deemed the RICO “person”
conducting the affairs of its parent through a pattern of
racketeering activity....

Fitzgerald, 116 F.3d at 227; see also Emery, 134 F.3d at 1324

(distinguishing the facts before it from Haroco). The only

infirmity of Haroco that the court pointed out was that it did not

require that the “subsidiary participate in the control of the
parent,” as the Supreme Court later required in Reves v. Ernst &

Young, 507 U.S. 170 (1993), a requirement we will address

momentarily. See Fitzgerald, 116 F.3d at 227. Richmond also cited

Haroco for the proposition that “a subsidiary that had conducted

the affairs of its parent corporation could be found liable under

§ 1962(c).” Richmond, 52 F.3d at 646. Therefore, the existence of

a subsidiary-parent relationship between the RICO person and

enterprise does not create an automatic bar to liability under

§ 1962(c).

The issue, however, is not resolved simply by determining that
the subsidiary may operate as the RICO person and the parent
corporation as the enterprise. The crux of a RICO violation is

criminality, and the circumstances must bear “at least a family

resemblance to the paradigmatic RICO case in which a criminal

obtains control of a legitimate ... firm and uses the firm as the
instrument of his criminality.” Emery, 134 F.3d at 1324.

Therefore, there is no liability under § 1962(c) unless the


-15-
that the revenue and profits from the vacketeering activity inured
to the benefit of Bancshares. Brannon, 153 F.3d at 1148 (another
allegation was that Bancshare’s financial statement, which
reflected this revenue, was issued to the public for the purpose of
raising capital that was, in turn, used to fund its subsidiaries,
including the defendant). The 10th Circuit determined that these
allegations were insufficient:

These allegations do nothing more than define a
legitimate corporate and financial relationship between
Boatmen’s and it’s holding company.

It is irrelevant to plaintiffs’ RICO claim against
Boatmen’s that the responsibility for organizing and
servicing consumer credit obligations was delegated to it
by Bancshares. This allegation does not show that the
subsidiary was engaged in the conduct of its parent's
affairs; to the contrary, it suggests that the handling
of consumer credit obligations was Boatmen’s affair.
Moreover, plaintiffs’ allegations that Boatmen’s revenue
and profits benefitted Bancshares establish nothing more
than that the bank holding company benefitted financially
from the success of its subsidiary - a fact that on its
own is unrelated to RICO liability.

Thus, the complaint alleges no activity on the part of
Bancshares that might reasonably be understood to
implicate it in the scheme attributed to Boatmen’s.
Id. at 1148-49. Here, too, absent any allegation that Sprint
Spectrum used Sprint Corporation to further its acts of
criminality, we can only conclude that Sprint Spectrum was simply

conducting its own affairs. See id.; see also Richmond, 52 F.3d at

647 (refusing to extend liability to defendants because the