Opinion ID: 30177
Heading Depth: 2
Heading Rank: 2

Heading: Whelan's RICO claims

Text: 10 Whelan asserts that Defendants violated all four subsections of 18 U.S.C. § 1962. 2 Elements common to all four are: (1) a person 3 who engages in (2) a pattern 4 of racketeering activity 5 (3) connected to the acquisition, establishment, conduct or control of an enterprise. Delta Truck & Tractor, Inc. v. J.I. Case Co., 855 F.2d 241, 242 (5th Cir.1988), cert. denied, 489 U.S. 1079, 109 S.Ct. 1531, 103 L.Ed.2d 836 (1989). 11 Central to the district court's grant of summary judgment was its conclusion that Whelan failed to demonstrate an enterprise. An enterprise is a group of persons or entities associating together for the common purpose of engaging in a course of conduct. United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 2528, 69 L.Ed.2d 246 (1981). The enterprise may be a legal entity or any union or group of individuals associated in fact although not a legal entity. 18 U.S.C. § 1961(4) (emphasis added). The plaintiff alleging an association-in-fact enterprise must adduce evidence demonstrating `an ongoing organization, formal or informal, and ... evidence that the various associates function as a continuing unit'. Atkinson v. Anadarko Bank & Trust Co., 808 F.2d 438, 439-40 (1987) (quoting Turkette, 452 U.S. at 583, 101 S.Ct. at 2528). The enterprise is not a pattern of racketeering activity, but must exist separate and apart from the pattern of racketeering activity in which it engages. Id. at 441. 12 For purposes of § 1962(c), which prohibits the conduct of an enterprise's affairs through a pattern of racketeering activity, the plaintiff must demonstrate not only that the enterprise is distinct from the series of predicate acts constituting racketeering activity, but also that the RICO person who commits the predicate acts is distinct from the enterprise. Bishop v. Corbitt Marine Ways, Inc., 802 F.2d 122, 123 (5th Cir.1986). It is not enough to establish that a defendant corporation through its agents committed the predicate acts in the conduct of its own business. Elliott v. Foufas, 867 F.2d 877, 881 (5th Cir.1989). That officers or employees of a corporation, in the course of their employment, associate to commit predicate acts does not establish an association-in-fact enterprise distinct from the corporation. Id.; see also Atkinson, 808 F.2d at 441. 13 Whelan alleged that Defendants were an association in fact consisting of the corporate Defendants, Sam Vaughan, Kim Vaughan, Amy Vaughan, Phillip Baldwin, Jr., both individually and as executor of the estate of Sam Vaughan, and Newton Dorsett. 6 Whelan argues that the enterprise's purpose to defraud the royalty owners of their payments is distinct from the predicate acts of mail and wire fraud, which were merely the means to accomplish the ultimate purpose. 14 Whelan's § 1962(c) claim cannot succeed because Whelan has not demonstrated an enterprise as required by that subsection. First, Whelan offers no competent evidence other than that of predicate acts to demonstrate an association between Newton Dorsett and the Winchester defendants. Dorsett's purchase of a well bore from Winchester and acquisition of a mineral lease from Winchester serve to connect him with the Winchester defendants in the commission of predicate acts, but fails to demonstrate the existence of an association separate from the predicate acts. Testimony from Whelan's expert witness, Kenneth Frazier, that Dorsett and Sam Vaughan had been in several deals together 7 is speculation; Frazier went on to state that he had no contact with Winchester during the period in which Sam Vaughan and Dorsett are supposed to have been associated. 8 15 Even if we accepted that Whelan's evidence demonstrated an association beyond the commission of predicate acts, Whelan is unable to demonstrate the association's continuity. The concept of continuity has been incorporated into the enterprise requirement in order to control the scope of RICO. Delta Truck, 855 F.2d at 243. An enterprise that briefly flourished and faded will not suffice; Whelan must adduce evidence showing that the enterprise functioned as a continuing unit. Landry v. Airline Pilots Ass'n Int'l, AFL-CIO, 901 F.2d 404, 433 (5th Cir.1990). The few transactions between Dorsett and the Winchester defendants supported by summary judgment evidence are insufficient to demonstrate the required continuity. 16 Putting aside the association between Dorsett and the Winchester defendants, Whelan urges us to consider the Winchester defendants alone as constituting an enterprise. The predicate acts committed by the Winchester defendants, such as mailing false production reports, were committed by agents and officers of Winchester in the ordinary course of business. No summary judgment evidence offered by Whelan demonstrates an association beyond one in the course of employment by Winchester. Company officers and employees not associated other than through the activities of the company do not constitute an enterprise for purposes of § 1962(c). 17 For the remaining subsections of § 1962, we consider the Winchester defendants alone as constituting an enterprise we conclude nonetheless that Whelan's evidence reveals no triable fact issues. Whelan offers only conclusory allegations in support of claims that the Winchester defendants violated § 1962(a) by using funds from racketeering to invest in an enterprise or violated § 1962(b) by acquiring or increasing their interests in an enterprise through racketeering. Moreover, Whelan points to no evidence demonstrating that § 1962(a) or (b) violations were the proximate cause of damages suffered by Whelan. See St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 443 (5th Cir.2000); Crowe v. Henry, 43 F.3d 198, 205 (5th Cir.1995). Finally, Whelan offers only conclusory allegations that Defendants violated § 1962(d) by conspiring to commit RICO violations. Conclusory allegations are insufficient to defeat a properly supported motion for summary judgment. Fed.R.Civ.P. 56(e). We conclude that the district court was correct to grant summary judgment dismissing Whelan's RICO claim.