Opinion ID: 677825
Heading Depth: 3
Heading Rank: 1

Heading: The Conduct or Participate Instruction

Text: 7 Section 1962(c) makes it unlawful for any person employed by or associated with a RICO enterprise to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity. Under the previously settled law of this circuit, a defendant did not have to operate or manage a RICO enterprise in order to conduct or participate in the conduct of the enterprise's affairs. See United States v. Scotto, 641 F.2d 47, 52-53 (2d Cir.1980), cert. denied, 452 U.S. 961, 101 S.Ct. 3109, 69 L.Ed.2d 971 (1981). However, we have recently recognized that the Supreme Court's holding in Reves--that at a minimum the defendant must have some part in directing [the enterprise's] affairs, --- U.S. at ----, 113 S.Ct. at 1170--is irreconcilable with the relevant portion of our decision in Scotto. See Napoli v. United States, 32 F.3d 31, 34-35 (2d Cir. Aug. 4, 1994). 8 In Reves, the Court adopted an operation or management test to gauge whether a defendant had a sufficient connection to the enterprise to warrant imposing liability under Sec. 1962(c). Under the Court's interpretation, simply aiding and abetting a violation is not sufficient to trigger liability even though Sec. 1962(c) punishes those who participate directly or indirectly in the enterprise's affairs. This is so because aiding and abetting liability extends beyond persons who engage, even indirectly, in a proscribed activity; aiding and abetting liability reaches persons who do not engage in the proscribed activity at all, but who give a degree of aid to those who do. Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., --- U.S. ----, ----, 114 S.Ct. 1439, 1447, 128 L.Ed.2d 119 (1994). The Court did not determine how far Sec. 1962 extends down the ladder of operation, though it indicated that [a]n enterprise is 'operated' not just by upper management but also by lower-rung participants in the enterprise who are under the direction of upper management. Reves, --- U.S. at ---- & n. 9, 113 S.Ct. at 1173 & n. 9. Some insight into the scope of the operation or management test can be discerned from the Court's intimation that while the operation or management test is more restrictive than aiding and abetting liability, it requires less than significant control over the enterprise. See Reves, --- U.S. at ---- & n. 4, 113 S.Ct. at 1170 & n. 4; Stone v. Kirk, 8 F.3d 1079, 1091-92 (6th Cir.1993). 9 We agree with Formisano that the district court's charge did not comport with the requirements of the statute as interpreted in Reves. The district court instructed the jury as follows: 10 The third element that the government must prove is that a defendant conducted or participated in the affairs of the enterprise. The terms conduct and participate in the conduct of an enterprise include the performance of acts, functions or duties that are necessary or helpful to the operation of the enterprise. 11 A person may participate in the conduct of an enterprise even though he had no part in the management or control of the enterprise and no share in any profits. But the participation must be willful and knowing. (emphasis added). 12 Since Reves, it is plain that the simple taking of directions and performance of tasks that are necessary or helpful to the enterprise, without more, is insufficient to bring a defendant within the scope of Sec. 1962(c). So also, the district court's instruction that Formisano could be convicted even though he had no part in the management or control of the enterprise, cannot be reconciled with the Reves requirement that the defendant have some part in directing the enterprise's affairs. Reves, --- U.S. at ----, 113 S.Ct. at 1170. We therefore find that the instruction given was erroneous under Reves.
13 Formisano did not object to the instruction at trial, and we are thus faced with the issue of whether we can correct this error on appeal. Our authority to review this erroneous jury instruction is Federal Rule of Criminal Procedure 52(b): 'Plain errors or defects affecting substantial rights may be noticed although they were not brought to the attention of the court.'  United States v. Jones, 21 F.3d 165, 172-73 (7th Cir.1994) (quoting Fed.R.Crim.P. 52(b)); see also United States v. Thai, 29 F.3d 785, 816-17 (2d Cir.1994). 14 As recognized by the Supreme Court, Rule 52(b) places three limits on appellate authority to review errors not preserved at trial. First, there must be error, or deviation from a legal rule which has not been waived. United States v. Olano, --- U.S. ----, ----, 113 S.Ct. 1770, 1777, 123 L.Ed.2d 508 (1993). Second, the error must be plain, which at a minimum means clear under current law. Id. Third, the plain error must, as the text of Rule 52(b) indicates, affect[ ] substantial rights, which normally requires a showing of prejudice. Id. at ---- - ----, 113 S.Ct. at 1777-78. 15 Generally, in plain error review under Rule 52(b), as contrasted with harmless error review under Rule 52(a), the defendant bears the burden of persuasion as to prejudice. Id. at ----, 113 S.Ct. at 1778. However, the Supreme Court in Olano specifically left open the question which now confronts us: namely, whether under Rule 52(b) special considerations apply where the error was unclear at the time of trial but becomes clear on appeal because the applicable law has been clarified. Id. at ----, 113 S.Ct. at 1777; see also id. at ---- - ----, 113 S.Ct. at 1777-78. We think that special considerations do apply. When a supervening decision alters settled law, the three Olano conditions for reviewing plain error under Rule 52(b) still must be met, but with one crucial distinction: the burden of persuasion as to prejudice (or, more precisely, lack of prejudice) is borne by the government, and not the defendant. 16 The reason for this distinction emerges when we contrast the case involving a supervening decision with the ordinary case in which plain error review is invoked. In the ordinary case, an event, such as the issuance of a jury instruction, occurs which is clear error under the law at the time of trial. Because the law is clear, the defendant is on notice of the duty to object. If he fails to object, he not only forfeits his legal right to have the error corrected, but he impedes the judicial process by failing to prompt the trial judge to make timely correction of the error. See id. at ----, 113 S.Ct. at 1776. It is proper to hold a defendant accountable for that failure, and to deter defendants from strategically withholding an objection in order to seek reversal on appeal. The defendant rightly bears the burden of proving prejudice in the ordinary case. 17 The situation is different when a supervening decision alters settled law. A defendant clearly has no duty to object to a jury instruction that is based on firmly established circuit authority. He cannot be said to have forfeited a right by not making an objection, since at the time of trial no legal right existed. If we were to penalize defendants for failing to challenge entrenched precedent, we would be insisting upon an omniscience on the part of defendants about the course of the law that we do not have as judges. Imposing such a duty would only encourage frivolous objections and appeals. When the source of plain error is a supervening decision, the defendant has not been derelict in failing to object at trial, and there is thus no cause to shift the burden of proving prejudice to the defendant. In this special context, as in harmless error review under Rule 52(a), the government must show that the error did not affect the defendant's substantial rights. 18 Our approach differs somewhat from that taken by the D.C. Circuit in United States v. Washington, 12 F.3d 1128 (D.C.Cir.1994), petition for cert. filed, (U.S. Apr. 14, 1994) (No. 93-8722). Washington held that plain error under Rule 52(b) must be plain under the law at the time of trial, and that a court of appeals makes a separate inquiry under the supervening-decision doctrine. Id. at 1138. However, we agree with the Seventh Circuit that current law as used in Olano means the law current at the time of the appeal, not at trial. Jones, 21 F.3d at 172-73 & n. 9 (finding jury instruction to be clear error in light of supervening decision even though the instruction was proper under prior circuit law); see also Thai, 29 F.3d at 816-17. This construction accords with Rule 52(b)'s purpose of restraining courts from reversing for minor deviations from the law, and is buttressed by Olano, which seems to indicate that Rule 52(b) encompasses supervening decisions. See --- U.S. at ----, 113 S.Ct. at 1777. Moreover, the Washington court does not explain the source of its authority to correct an error arising from a supervening decision, if neither Rule 52(a) nor 52(b) provides that authority. The better view is that Rule 52(b) is the sole source of our authority to correct errors not preserved by objection. See Jones, 21 F.3d at 172-73. 19 Finally, we note that the rule that the burden rests on the government to show that plain error in light of a supervening decision did not affect substantial rights applies only when the supervening decision alters a settled rule of law in the circuit. When a point of law has not been addressed or has been inconsistently declared in this circuit, the general plain error rule applies: a defendant has a duty to object to an unfavorable application of the law. His objection forces the district court to determine the matter in the first instance, and preserves the issue for us to resolve on appeal. The defendant's vigilance promotes the advance of the law. As is generally true under Rule 52(b), when the defendant is derelict in his duty, the burden shifts to him to persuade us that the plain error affects his substantial rights. Our precedents even prior to Olano establish that the general plain error rule applies when the supervening decision clarifies unsettled circuit law and objections would not be futile. See United States v. Scarpa, 913 F.2d 993, 1019 (2d Cir.1990); United States v. Tillem, 906 F.2d 814, 825 (2d Cir.1990).
20 Here we do have a supervening Supreme Court decision overturning settled circuit precedent, and the modified plain error rule applies. As discussed above, the first and second conditions for appellate authority under Rule 52(b) are met: the jury instruction was error as a deviation from the current law of Reves, and the error was plain. See Olano, --- U.S. at ----, 113 S.Ct. at 1777. As to the third condition of prejudice, the government is unable to persuade us that the instruction did not affect Formisano's substantial rights. The entirety of the proof with respect to Formisano showed that, acting under Viola's instructions, he transported some stolen beer and lamps to buyers and returned most of the proceeds from the sales to Viola. In contrast with the other defendants, Formisano's participation was limited to these two acts which were undertaken without the exercise of appreciable discretionary authority. Viola was the kingpin of the operation who was contacted by drug owners and who would decide how best to remove the drugs from the docks. Viola and the other defendants also decided to whom to sell stolen goods, and for how much. Formisano, on the other hand, was not consulted in the decision-making process and exercised no discretion in carrying out Viola's orders. Compare Thai, 29 F.3d at 816 (defendant conceived and performed racketeering acts without prior approval). There was no evidence that he was even aware of the broader enterprise. See Part B, infra. While Formisano's acts might have contributed to the success of the RICO enterprise, he simply did not come within the circle of people who operated or managed the enterprise's affairs. Although Reves still attaches liability to those down the ladder of operation who nonetheless played some management role, it is plain to us that, since Reves, Sec. 1962(c) liability cannot cover Formisano. Formisano was not on the ladder at all, but rather, as Viola's janitor and handyman, was sweeping up the floor underneath it. Since Formisano was convicted of violating Sec. 1962(c) in the absence of evidence sufficient to bring him within the terms of that provision, he suffered clear prejudice from the erroneous instruction. 21 We conclude that the district court's instruction was plain error. Because the error seriously affected the fairness of his trial, see Olano, --- U.S. at ----, 113 S.Ct. at 1779, we exercise our discretion under Rule 52(b) to reverse his conviction on this count.