Opinion ID: 715406
Heading Depth: 3
Heading Rank: 1

Heading: Substantive RICO Claim

Text: 43 Section 1962(c) makes it unlawful for any person employed by or associated with any enterprise engaged in interstate commerce, to conduct or participate in the conduct of the enterprise's affairs through a pattern of racketeering activity. PG & E argues that the district court erred when it found that there was inadequate evidence to establish continuity. For the reasons set forth below, we agree with the district court and affirm. 44
45 The first element in a RICO § 1962(c) action is that there be proof of a RICO enterprise. Enterprise is defined in § 1961(4) of the Act as any individual, partnership, corporation, association or other legal entity, and any union or group of individuals associated in fact although not a legal entity. 18 U.S.C. § 1961(4). The statutory definition applies to both civil and criminal RICO actions. The definition of enterprise encompasses any type of formal, legal entity and allows RICO plaintiffs considerable scope. 46 The Supreme Court has defined a RICO enterprise as a group of persons associated together for a common purpose of engaging in a course of conduct. United States v. Turkette, 452 U.S. 576, 583 (1981). Proof of the existence of an enterprise is made by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit. Id. 47 In Turkette, the Supreme Court resolved a split among the circuits by holding that, for RICO purposes, either legitimate or illegitimate associations of individuals united for illicit purposes could constitute an enterprise. 452 U.S. at 584-85. The enterprise must be shown to have an existence separate and distinct from the pattern of racketeering activity engaged in by its members or associates. This distinction is, of course, simple to perceive and to show when a legal entity is alleged as the RICO enterprise. When, as in this case, the alleged enterprise is an association-in-fact, it is quite often considerably more difficult to show the requisite degree of separateness. 48 In River City Markets, Inc. v. Fleming Foods West, Inc., 960 F.2d 1458 (9th Cir.1992), the Ninth Circuit followed Turkette in finding that a group of individuals or corporations may together constitute a RICO enterprise even though they do not incorporate or otherwise form a legal entity. 960 F.2d 1458, 1461. While showing the separate existence of the enterprise, a § 1962(c) plaintiff must also prove that a nexus exists between the enterprise and the pattern of racketeering activity. The pattern of racketeering activity is employed as a means of conducting, or participating in, the affairs of the enterprise. Because we find that there was a lack of continuity, PG & E has failed to establish the element of a pattern of racketeering activity. It is this element that we focus on now. 49
50 The RICO statute defines a pattern of racketeering activity as two or more acts of racketeering, one of which occurred after the passage of the RICO Act and within ten years of the date of the other act of racketeering. 18 U.S.C. § 1961(5). The test for establishing the pattern of racketeering activity is relationship plus continuity. This flexible, common-sense test is applied on an ad hoc basis. 51 The relationship prong of the test relates to a showing that the alleged racketeering acts are related to each other in terms of similarity of acts, victims, or methods. The continuity prong relates to the magnitude of the scheme, i.e., the longer a scheme lasts, the more likely it is that continuity will be found. Mostly, the pattern essentially defines the magnitude of the alleged racketeering activity. 52 In 1989, the Supreme Court expanded on the concept of continuity plus relationship. In H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989), the RICO complaint at issue alleged that over a six-year period, the Northwestern Bell Telephone Company had been engaged in a variety of actions to improperly influence telephone rate-making decisions of the Minnesota Public Utilities Commission, causing the Commission to set telephone rates in excess of a fair and reasonable amount. The alleged improprieties included payments of cash to commissioners; offers of future employment; and providing various forms of entertainment. 492 U.S. at 233. 53 The outer limits of judicial liberality on the pattern of racketeering issue since H.J. were demonstrated in Ikuno v. Yip, 912 F.2d 306 (9th Cir.1990). In this RICO action brought by investors against a commodities firm based in Hong Kong, an attorney who had filed two annual reports for the firm sought summary judgment as to himself on the basis that a pattern of racketeering was lacking. This Court, in Ikuno, said that there is no talismanic number of predicate acts for a pattern but noted that H.J. indicated that two predicates could create a pattern in certain circumstances. 912 F.2d at 309. In Ikuno, the filing of two allegedly false annual reports by the attorney carried the threat of continuity as the filings would have continued indefinitely but for the fact the commodities firm ceased doing business. Id. 54 Similarly, in Ticor Title Ins. v. Florida, 937 F.2d 447 (9th Cir.1991), the Court affirmed a bench trial judgment in favor of the plaintiffs. In Ticor, the predicate offenses were three forgeries of IRS tax lien releases over a 13-year period. As in Ikuno, the Court did not focus on a strictly numerical analysis. It found the predicate acts were related to each other by similar purposes and methods of commission and that the threat of continuity was present because the activity was becoming a regular way of doing business by defendants. 937 F.2d at 450-51. 55
56 The main problem with PG & E's evidence is that it fails to establish the continuity element that is required for the RICO claim. PG & E offered the following evidence at trial: 57 (1) Fischbach's invitation to Foley to join the group. In support of this contention, PG & E notes Brown's testimony that he travelled with Charles Berrell, his boss, to Salt Lake City in 1965 to meet Jerry Littman, manager of Fischbach's San Francisco office, and Francis Kellstrom, Fischbach's president, regarding the Shell Oil refinery job. 58 (2) Brown's testimony that Berrell, Matthew Kammenzind of Lord Electric and Hank Dias of Contra Costa Electric urged him to cooperate with the group of Bay Area managers and play by its rules. PG & E notes that this group included Fischbach. 59 (3) Korman's phone call to Brown asking him if he would go along and telling him they could work something out. 60 (4) Korman's trial testimony that (a) as soon as he arrived in San Francisco, he was invited to a meeting with branch managers from the five national contractors at the Walnut Creek Inn to discuss the allocation of jobs and (b) another meeting with a similar agenda took place in Benecia. 61 (5) The Brown-Kleinhoff and Brown-Kammenzind phone calls discussing payoffs and cooperating with one another. 62 (6) Rick Erwin's testimony that the enterprise continued into the late 1970s and possibly into the early 1980s and that he was present when competitors negotiated jobs. 63 From this evidence, a reasonable juror could not find that Fischbach's alleged acts amounted to or threatened a continuing criminal activity. At most, PG & E has presented circumstantial evidence of suspect conduct that does not amount to a pattern of racketeering in violation of RICO. Upon making a fact-specific inquiry of the record, we find that although the few instances that PG & E allege may be sufficient to allow a reasonable juror to find Sherman Antitrust Act violations, they do not suffice to meet RICO's pattern requirement. 64 The district court accurately found that PG & E failed to present sufficient evidence to establish a RICO claim.