Opinion ID: 526475
Heading Depth: 2
Heading Rank: 4

Heading: Liability of Krypton

Text: 52 Krypton, in its motion for a directed verdict and j.n.o.v., claimed that it could not be liable because it was not yet incorporated during the existence of the alleged scheme. The district court denied the motions holding Krypton liable as a de facto corporation. 53 RICO allows parties injured by RICO violations to recover from the RICO violators, but only persons can violate RICO. 18 U.S.C. § 1962(c) and § 1964(c). Person is defined to include any individual or entity capable of holding a legal or beneficial interest in property. 18 U.S.C. § 1961(3). 54 Under the uncontested circumstances of this case, we hold Krypton to be entitled to a directed verdict. During all times relevant to the RICO violations, Krypton, as an entity, did not have the capacity to hold either legal or beneficial title to property. It follows that Krypton could not violate RICO because it was not a legal person. 55 Although a de facto corporation under Ohio law can hold property, under the facts here, a de facto corporation could not have existed. See 11 Ohio Jur. 3d, Business Relationships § 36 (1979) (stating, a de facto corporation possesses all of the power and authority of a de jure corporation). In order for a corporation to have de facto status, however, three conditions must be fulfilled: there must be: (1) a general law under which a corporation may lawfully exist; (2) a good faith attempt to organize under the law and a colorable compliance with the statutory requirements; and (3) actual use or exercise of corporate privileges. Read v. Tidewater Coal Exchange, Inc., 13 Del.Ch. 195, 116 A. 898 (1922); Society Perun v. Cleveland, 43 Ohio St. 481, 3 N.E. 357 (1885); Henn & Alexander, Laws of Corporations § 140 (3d ed. 1983); 11 Ohio Jur. 3d, Business Relationships § 40 (1979). 56 The record makes no indication that there was a good faith attempt to organize or to comply with the statutory requirements. The only evidence in the record was the two letters written on Krypton stationery and Feltner's remark that he thought he told his lawyer to incorporate Krypton. These efforts fall far short of any good faith attempt to incorporate. There is nothing else in the record to indicate that Krypton was any kind of entity capable of holding legal or beneficial title to property. 57 Whatever Krypton was, it was a part of the enterprise, but it was not a person associated with such enterprise. It cannot, then, be held liable, although individuals who owned and/or operated this entity may have had liability.