Opinion ID: 772585
Heading Depth: 3
Heading Rank: 1

Heading: Sufficiency of Allegations Under sec. 1962(c)

Text: 45 In order to state a viable cause of action under sec. 1962(c), a plaintiff must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. See Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985). 8 Taking the facts alleged in Slaney's complaint as true (without vouching for their truth), the USOC is the domestic representative or agent of the IOC and is responsible for carrying out the mission of the IOC and the Olympic Movement. The USOC is subject to the IOC's drug testing program, which it carries out in the United States, and is a member of the Olympic Movement. Finally, the Olympic Movement is subject to the supreme authority of the IOC. Thus, Slaney posits, the USOC are persons associated with the enterprise that is the Olympic Movement. 46 Slaney's RICO claim against the USOC is legally insufficient for a number of reasons. As the district court did, we will first examine whether Slaney's complaint satisfies the conduct prong of a 1962(c) cause of action. 9 According to the Supreme Court, in order to have conducted or participated in the enterprise's affairs under sec. 1962(c), the person charged must have had some part in directing those affairs. See Reves v. Ernst & Young, 507 U.S. 170, 179 (1993). In other words, she must have participated in the operation or the management of the enterprise itself, and she must have asserted some control over the enterprise. United States v. Swan, 224 F.3d 632, 635 (7th Cir. 2000). Slaney suggests that because the USOC is responsible for administering the drug testing program in the United States, that the USOC conducts the affairs of the enterprise. While Slaney is correct that sec. 1962(c) does not require the individual (here, the USOC) to have absolute domination over the enterprise (in this instance, the Olympic Movement), RICO does require that the person have had some control over the enterprise itself. See Swan, 224 F.3d at 635. 47 Slaney's complaint fails to allege that the USOC exerts any control over the Olympic Movement. In fact, Slaney's description of the Olympic Movement suggests a structure in which the USOC could not have directed the enterprise's affairs. The complaint suggests the Movement as operating under the supreme authority of the IOC which has sole responsibility for allowing members into the Movement. The USOC is described as merely a domestic representative or agent... responsible for carrying out the mission of the IOC. The complaint is devoid of any suggestion that as an agent, the USOC took part in managing the Movement. 48 At best, Slaney has alleged that the USOC has been delegated the authority by the Movement to conduct the drug testing program in the United States. However, as we have made patent, simply performing services for an enterprise, even with knowledge of the enterprise's illicit nature, is not enough to submit an individual to RICO liability under sec. 1962(c). Goren, 156 F.3d at 728. Rather, we require that the defendant must participate in the operation or management of the enterprise. Id. at 727. Slaney's complaint contains no allegation that the USOC, as an individual, had any control over the enterprise itself. While Slaney suggests such lack of control is besides the point, the Supreme Court has held to the contrary. See Reves, 507 U.S. at 179. We cannot draw the conclusion that USOC's control over one aspect of the Olympic Movement's activities in this country translates into the USOC having had control over the Movement as an enterprise. Simple exertion of control over one aspect of an enterprise's activities does not evince control over the enterprise itself. 49 Even if Slaney's complaint could be read to allege that the USOC took some part in directing the Olympic Movement's affairs, it fails (as the district court noted) to satisfy the pattern requirement of 1962(c) because it fails to plead sufficient facts to show that the USOC engaged in a pattern of racketeering activity. As stated above, a pattern of racketeering activity consists, at a minimum, of two predicate acts of racketeering (committed within a ten-year time period). See Goren, 156 F.3d at 728. Here, Slaney advances the predicate acts of mail and wire fraud. See 18 U.S.C. sec.sec. 1341, 1343. As we noted earlier, a plaintiff alleging predicate acts of mail and wire fraud must do so with particularity. See Fed.R.Civ.P. 9(b). In order to satisfy this standard, a RICO plaintiff must allege the identity of the person who made the representation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff. See Vicom, Inc. v. Harbridge Merchant Serv., Inc., 20 F.3d 771, 777 (7th Cir. 1994). Moreover, because a RICO plaintiff must allege two predicate acts of fraud, she must satisfy the requirements of Rule 9(b) twice. See Emery v. American Gen. Fin., Inc., 134 F.3d 1321, 1323 (7th Cir. 1998). 50 After examining Slaney's complaint, we find that she has failed to allege a pattern of racketeering activity with sufficient particularity to satisfy the requirements of Rule 9(b). Slaney's complaint asserts that the USOC used and continues to use the mails and wires to convey their false and deceptive communications to and about Mrs. Slaney, which communications were and continue to be an integral component of the fraudulent scheme. To satisfy the particularity requirements of Rule 9(b), Slaney suggests that we examine paragraphs 1-104 of her complaint. 10 A perusal of the complaint convinces this Court that Slaney has not alleged two predicate acts. According to Slaney, the USOC informed the USATF that it was mandatory for the USATF to conduct an investigation of Slaney's urine sample before she could be declared positive for prohibited testosterone. Slaney suggests that this information was first transmitted to the USATF on June 28, 1996 and then again two weeks later. As such, Slaney suggests that we find that the pattern requirement of RICO has been satisfied. 51 Slaney has not presented any case law, nor have we found any precedent for the proposition that a single fraudulent representation, reiterated once over a two-week period can constitute a pattern of racketeering for 1962(c) purposes. In Lipin Enterprises, Inc. v. Lee, 803 F.2d 322, 324 (7th Cir. 1986), we held that a single fraudulent scheme with only one injury to one victim was not a pattern of racketeering activity under sec. 1962(c) simply because it required several acts of mail and wire fraud to inflict the single injury. In so holding, we noted that mail fraud and wire fraud are perhaps unique among the various sorts of racketeering activity possible under RICO in that the existence of a multiplicity of predicate acts may be no indication of the requisite continuity of the underlying fraudulent activity. Thus, a multiplicity of mailings does not necessarily translate into a pattern of racketeering activity. See Lipin, 803 F.2d at 325; see also Ashland Oil, Inc. v. Arnett, 875 F.2d 1271, 1278-79 (7th Cir. 1989); Tellis v. United States Fidelity & Guar. Co., 826 F.2d 477, 478 (7th Cir. 1986) (multiple acts of mail fraud in furtherance of a single episode of fraud involving one victim and relating to one basic transaction cannot constitute the necessary pattern). Nor is the fact that Slaney suggests the USOC continues to conduct the drug testing program in the United States sufficient to plead the pattern requirement. Indeed, we have repeatedly held that a plaintiff's conclusory allegations that 'defendants' also defrauded unidentified 'others' are not enough to plead the requisite pattern of fraud. Goren, 156 F.3d at 729. Because the single representation that the USATF would conduct the investigation into Slaney's urine sample is the only fraud alleged in the complaint, that complaint fails to state a claim under sec. 1962(c). Thus, the district court was correct when it noted that Slaney's claim does not come close to fitting the family of claims Congress intended the RICO statute to cover. 11 52