Opinion ID: 725000
Heading Depth: 3
Heading Rank: 2

Heading: Subsection 1962(c)--RICO conduct

Text: 25 Discon also alleges a violation of subsection 1962(c), which prohibits any person employed by or associated with any enterprise ... to conduct ... such enterprise's affairs through a pattern of racketeering activity.... 18 U.S.C. § 1962(c). 8 For this claim, Discon redefines the enterprise as the NYNEX Group, which consists of the three corporations, NYNEX, MECo, and NYTel. Discon claims that these three corporate persons conducted the affairs of the NYNEX Group enterprise through a number of illegal predicate acts. 26 We have previously held, however, that subsection 1962(c) clearly envisions that the person and the enterprise will be distinct. Bennett v. United States Trust Co., 770 F.2d 308, 315 (2d Cir.1985), cert. denied, 474 U.S. 1058, 106 S.Ct. 800, 88 L.Ed.2d 776 (1986). [A] corporate entity may not be simultaneously the 'enterprise' and the 'person' who conducts the affairs of the enterprise through a pattern of racketeering activity. Id. In Riverwoods Chappaqua Corp. v. Marine Midland Bank, 30 F.3d 339 (2d Cir.1994), we explained further that the distinctiveness requirement of Bennett may not be circumvented by alleging a RICO enterprise that consists merely of a corporate defendant associated with its own employees or agents carrying on the regular affairs of the defendant.... Id. at 344. Where employees of a corporation associate together to commit a pattern of predicate acts in the course of their employment and on behalf of the corporation, the employees in association with the corporation do not form an enterprise distinct from the corporation. Id. Thus, in Riverwoods, we found that the activities of two loan officers acting within the scope of their authority could not subject them to RICO liability for conducting the affairs of the alleged enterprise-bank. 27 In response, Discon cites Cullen v. Margiotta, 811 F.2d 698 (2d Cir.), cert. denied, 483 U.S. 1021, 107 S.Ct. 3266, 97 L.Ed.2d 764 (1987), for the proposition that a defendant may simultaneously be a RICO person and one of a number of members in the RICO enterprise. Id. at 729-30. In Cullen, the enterprise was defined as an association of three separate entities--a municipality, the town Republican Committee, and the county Republican Committee. Id. at 728. We held that any of the three individual entities could be convicted under subsection 1962(c) for its participation in the tripartite enterprise. 28 The difference between Riverwoods and Cullen appears to lie in the fact that Riverwoods involved only a single corporate entity that was associated with its employees, whereas Cullen involved three legally separate entities that could be differentiated from the enterprise-group. Moreover, in Riverwoods, the individual defendants were acting on behalf of the enterprise-corporation, and therefore, it would have been especially inappropriate to hold that they were distinct from the enterprise. 29 In this case, we confront a situation that lies somewhere between Riverwoods and Cullen. Like the defendants in Riverwoods, NYNEX, MECo and NYTel operate within a unified corporate structure. At the same time, however, they are also legally separate entities from each other and from the NYNEX Group. Although our decision is by no means dictated by clear precedent, we believe that Riverwoods presents the more analogous situation. The relationship between NYNEX, MECo, and NYTel in comparison to the NYNEX Group is not substantially different from that between the loan officers in Riverwoods in comparison to the bank. In both cases, the individual defendants were acting within the scope of a single corporate structure, guided by a single corporate consciousness. It would be inconsistent for a RICO person, acting within the scope of its authority, to be subject to liability simply because it is separately incorporated, whereas otherwise it would not be held liable under Riverwoods. But see Haroco, Inc. v. American National Bank and Trust Co., 747 F.2d 384, 402 (7th Cir.1984) (wholly-owned subsidiary is technically distinct from parent corporation and may be liable under RICO), aff'd on other grounds, 473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985). 30 Discon's reference to unnamed attorneys, accountants and other agents as part of the enterprise does not alter this analysis. Riverwoods expressly applies to agents as well as employees so long as those persons act on behalf of the corporation. Although the situation might be different if the defendants were acting outside the scope of their agency, this situation is not presented here.