Opinion ID: 2585
Heading Depth: 5
Heading Rank: 1

Heading: NCCigarettes

Text: Defendants in NCCigarettes argue that NCCigarettes.com is a sole proprietorship run by Scott Herring, not an enterprise, and that the additional personsJeff Reinhardt and Xfirecommitted no predicate acts under RICO and are not liable because Xfire was merely an Internet service provider that provided services to the alleged enterprise. NCCigarettes.com's claim that it is a sole proprietorship is unavailing at this stage in the pleadings. Though we have not previously spoken on this, our sister circuits have allowed § 1962(c) claims to proceed when the enterprise is a sole proprietorship with a distinct and separate identity from that of the individual defendant who owns it. These circuits have held that a defendant is distinct from the sole proprietorship enterprise, unless the sole proprietor is strictly a one-man show. McCullough v. Suter, 757 F.2d 142, 144 (7th Cir.1985) (The only important thing is that [the enterprise] be either formally (as when there is incorporation) or practically (as when there are other people besides the proprietor working in the organization) separable from the individual.); United States v. Benny, 786 F.2d 1410, 1415-16 (9th Cir.) (affirming RICO conviction where defendant's sole proprietorship was a troupe, not a one-man show), cert. denied, 479 U.S. 1017, 107 S.Ct. 668, 93 L.Ed.2d 720 (1986); see also Guidry v. Bank of LaPlace, 954 F.2d 278, 283 (5th Cir.1992) (espousing the approach to sole proprietorships announced in McCullough, but holding that the distinctness requirement was not met under the circumstances of the case). Under this approach, which we now join, we find that the City has adequately alleged distinctness as to the NCCigarettes.com primary enterprise because the City has alleged that Herring's sole proprietorship is not a one-man show. However, we agree with defendants Xfire and Reinhardt that the allegations are insufficient to state a claim against them as RICO persons. As explained earlier, § 1962(c) makes it unlawful for any person employed by or associated with an enterprise ... to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs.... 18 U.S.C. § 1962(c). In Reves v. Ernst & Young, the Supreme Court explained that [i]n order to `participate, directly or indirectly, in the conduct of such enterprise's affairs,' one must have some part in directing those affairs. 507 U.S. 170, 179, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993); see also id. at 184, 113 S.Ct. 1163 ([I]t is clear that Congress did not intend to extend RICO liability under § 1962(c) beyond those who participate in the operation or management of an enterprise through a pattern of racketeering activity.). Although this is a low hurdle to clear at the pleading stage, see Satinwood, 385 F.3d at 176, the City's allegations most generously construed  simply do not clear it with respect to Xfire or Reinhardt. [28] These defendants are not alleged to have violated the Jenkins Act, and, unlike the named RICO person in the other primary enterprises, neither Xfire nor Reinhardt are alleged to have directed or caused the enterprise to commit a Jenkins Act violation. Simply alleging that certain entities provide services which are helpful to an enterprise without any allegations that those entities exert any control over the enterprise does not sufficiently allege a claim under RICO against those entities. See Reves, 507 U.S. at 179, 113 S.Ct. 1163; see also, e.g., Azrielli v. Cohen Law Offices, 21 F.3d 512, 521 (2d Cir.1994); Univ. of Md. at Baltimore v. Peat, Marwick, Main & Co., 996 F.2d 1534, 1539-40 (3d Cir.1993).