Opinion ID: 497048
Heading Depth: 2
Heading Rank: 1

Heading: Civil RICO Claim

Text: 7 The appellants claim that their complaint set forth a cause of action under RICO. Section 1964(c) establishes the basis for civil suits under RICO. It states in part: 8 Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor ... and shall recover threefold the damages he sustains.... 9 In order to state a claim under section 1962(c), a plaintiff must allege (1) conduct, (2) of an enterprise, (3) through a pattern, and (4) of racketeering activity. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S. Ct. 3275, 3285, 87 L.Ed.2d 346 (1985); Simon Oil Co. v. Norman, 789 F.2d 780, 781 (9th Cir.1986). In light of Sedima, proper emphasis must be placed on pattern as an independent component of a RICO claim. Sedima, 105 S.Ct. at 3285 n. 14. The facts alleged in the complaint do not constitute a pattern of racketeering activity and this deficiency is, in our view, dispositive of the RICO claim. 2 10 Section 1962(c) renders unlawful the conduct, through a pattern of racketeering activity, of the affairs of an enterprise engaged in, or whose activities affect, interstate commerce. Sections 1962(a) and (b) define other RICO-prohibited activity, each of which requires the common thread of a pattern of racketeering activity. Section 1961(1) defines racketeering activity as any number of several enumerated illegal acts, including any act which is indictable under ... [18 U.S.C.] Section 1341 (relating to mail fraud) ... and [18 U.S.C.] Section 1343 (relating to wire fraud). 11 Section 1961 provides definitions and explanations of various terms used in RICO. As pointed out by the Supreme Court in Sedima, some of the terms are defined, such as racketeering activity, state, racketeering investigator, and racketeering investigation. Section 1961 specifies what each of these terms, as used in RICO, means. As to other terms, section 1961 merely specifies what is included within the meaning of each term. In explaining the use of the term, pattern of racketeering activity, section 1961 specifies only what that term requires. Section 1961(5) provides: 12 [P]attern of racketeering activity requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity. 13 In response to the criticism of RICO, the Court in Sedima stated that [t]he 'extraordinary' uses to which civil RICO has been put appear to be primarily the result of the breadth of the predicate offenses ... and the failure of Congress and the courts to develop a meaningful concept of 'pattern'. Sedima, 105 S.Ct. at 3287. Although the Court in Sedima did not rule on the pattern question in the case before it, the Court did elaborate on the meaning of pattern in plain and deliberate terms in footnote 14 of its opinion. 14 As many commentators have pointed out, the definition of a pattern of racketeering activity differs from the other provisions in Sec. 1961 in that it states that a pattern requires at least two acts of racketeering activity, Sec. 1961(5) (emphasis added), not that it means two such acts. The implication is that while two acts are necessary, they may not be sufficient. Indeed, in common parlance two of anything do not generally form a pattern. The legislative history supports the view that two isolated acts of racketeering activity do not constitute a pattern. As the Senate Report explained: The target of [RICO] is thus not sporadic activity. The infiltration of legitimate business normally requires more than one 'racketeering activity' and the threat of continuing activity to be effective. It is this factor of continuity plus relationship which combines to produce a pattern. S.Rep. No. 91-617, p. 158 (1969) (emphasis added). Similarly, the sponsor of the Senate bill, after quoting this portion of the Report, pointed out to his colleagues that [t]he term 'pattern' itself requires the showing of a relationship.... So, therefore, proof of two acts of racketeering activity, without more, does not establish a pattern .... 116 Cong.Rec. 18940 (1970) (statement of Sen. McClellan). See also id., at 35193 (statement of Rep. Poff) (RICO not aimed at the isolated offender); House Hearings, at 665. Significantly, in defining pattern in a later provision of the same bill, Congress was more enlightening: criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events. 18 U.S.C. Sec. 3575(e). 15 Id. at 3285 n. 14 (emphasis added). 16 Thus, the Court in Sedima stressed the importance of the finding of a pattern of racketeering activity, as distinguished from just a finding of the commission of two of the predicate acts, in order to constitute a RICO violation. The Court indicated that in order to constitute a pattern, the two predicate acts must be related, not just isolated criminal acts. Furthermore, there must be some continuity to the criminal activity. 17 In this case, the alleged activity consists of fraudulently obtaining a federal grant with the intent to use it to campaign against Proposition 9 on the California ballot. Appellants have asserted three specific predicate acts. Each involves the manner in which funds were obtained. It is the acquisition of funds that constitutes the alleged criminal violations or predicate acts, according to plaintiffs, not the actual use of those funds. Thus, the question presented here is whether the requisite continuity and relationship implicit in the concept of pattern is established by this discreet activity, which has a distinct and easily defined beginning and end, even though supported by several alleged predicate acts of mail and wire fraud. 18 We have followed the circuits which do not limit the pattern of racketeering requirement to multiple schemes or episodes. California Architectural Building Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1469 n. 1 (9th Cir.1987); Sun Savings & Loan Ass'n v. Dierdorff, 825 F.2d 187, 191-94 (9th Cir.1987). Rather, in light of Sedima , we have framed the question as whether the acts are isolated or repeated and, if repeated, whether they pose a threat of continuing activity. Id. at 193. In Schreiber Distributing Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1399 (9th Cir.1986), we held that in order to establish a pattern, there must be a threat of continuing activity, and that alleged acts of mail and wire fraud that led to only one shipment of goods did not meet the requirement of a pattern of racketeering activity. In Sun Savings we followed Schreiber, but distinguished it, finding that four predicate acts employed over several months to cover up a series of kickbacks constituted a threat of continuing activity. 19 In this case, the appellants' complaint, liberally construed, alleged that Western Center, LAFLA, and the Jarvis II Task Force committed the predicate offenses of mail and wire fraud by misrepresenting to the LSC the intended use of the Special Needs Grant. The pattern here alleged is the appellees' scheme, through both mail and telephone communications, to misappropriate federal funds in opposing Proposition 9. Even if such a scheme existed and the mail and telephone were used to facilitate it, it was, at most, isolated and presented no threat of continuing. Although the alleged predicate acts of mail fraud and wire fraud were indeed related to that objective, this is not sufficient to constitute a pattern of racketeering activity.