Opinion ID: 492033
Heading Depth: 2
Heading Rank: 1

Heading: introduction

Text: 33 Defendant Western also attacks the sufficiency of this complaint on another ground, which pertains to it alone. Western contends that the complaint impermissibly alleges it to be both an enterprise and a person for RICO purposes when in fact, Western argues, a defendant may fit into one or another of those legal categories but not both at the same time. Specifically, Western attacks Counts XI and XII of the complaint, which allege that it is liable on the basis of the doctrine of respondeat superior or as an aider and abettor for all of the wrongs alleged in Counts I through X of the complaint. 7 Western contends that imposing liability under either of these theories would enable plaintiffs to circumvent what it contends is the rule preventing an enterprise from being liable to the (other) victims of racketeering activity. 34 Since there is no federal general common law, Erie Railroad v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938), the applicability of common law doctrines in litigation under federal statutes depends on whether those principles advance the goals of the particular federal statute which plaintiffs allege has been violated. American Society of Mechanical Engineers v. Hydrolevel Corp., 456 U.S. 556, 570, 102 S.Ct. 1935, 1944-45, 72 L.Ed.2d 330 (1982) (applying common law principle of apparent authority in antitrust context because the doctrine is consistent with the congressional intent to encourage competition which animates the antitrust laws). 35 This Court has already held that one can violate RICO criminally by aiding and abetting the commission of two predicate acts, provided that all of RICO's other requirements are also satisfied. United States v. Local 560, 780 F.2d 267, 288 n. 25 (3d Cir.1985). We have not yet addressed the question of civil RICO liability for aiding and abetting. But the Fifth Circuit has declared its willingness to find civil RICO violated by an aider and abettor, Armco Indus. Credit Corp. v. SLT Warehouse Co., 782 F.2d 475, 485-86 (5th Cir.1986), as has one judge in the Southern District of New York. Laterza v. American Broadcasting Co., 581 F.Supp. 408, 412 (S.D.N.Y.1984). We now join those courts, and hold that, if all of RICO's other requirements are met, an aider and abettor of two predicate acts can be civilly liable under RICO. 36 We begin our explanation of this conclusion by observing that aiding and abetting is most commonly used as a theory of criminal, rather than civil liability. It is generally said to be defined in American law by several well known criminal law cases, see Pinkerton v. United States, 328 U.S. 640, 66 S.Ct. 1180, 90 L.Ed. 1489 (1946); Nye & Nissen v. United States, 336 U.S. 613, 69 S.Ct. 766, 93 L.Ed. 919 (1949); United States v. Peoni, 100 F.2d 401 (2d Cir.1938), and is now a basis of federal criminal liability by operation of 18 U.S.C. Sec. 2. Through the criminal law, however, aiding and abetting has also become a basis for civil liability under the federal securities laws. See David S. Ruder, Multiple Defendants in Securities Law Fraud Cases: Aiding and Abetting, Conspiracy, In Pari Delicto, Indemnification and Contribution, 120 U.Pa.L.Rev. 597, 620-28 (1972). While the Supreme Court has reserved the issue, Ernst & Ernst v. Hochfelder, 425 U.S. 185, 190-91 n. 7, 96 S.Ct. 1375, 1380 n. 7, 47 L.Ed.2d 668 (1976), every circuit court to have addressed the question has held that there can be civil liability for aiders and abettors of securities law violations. See Monsen v. Consolidated Dressed Beef Co., 579 F.2d 793 (3d Cir.1978) (imposing aiding and abetting liability under Sec. 10b of the Securities and Exchange Act of 1934); Thomas Lee Hazen, Securities Regulation Sec. 7.8 at 208-09 & n. 4 (1985) (collecting cases). 37 The doctrine also has a civil common law application. The Restatement (Second) of Torts Sec. 876(b) holds that liability [f]or harm resulting to a third person from the tortious conduct of another ... [can be imposed upon a party who] (b) knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself. That Restatement provision has been applied by a number of state and federal courts in civil litigation. See, e.g., Rael v. Cadena, 93 N.M. 684, 604 P.2d 822 (1979) (defendant liable under Sec. 876(b) for encouraging third party to assault plaintiff); Cobb v. Indian Springs, Inc., 258 Ark. 9, 522 S.W.2d 383 (1975) (defendant liable under same theory for urging third party to drive car recklessly, which resulted in driver's injuring plaintiff); Smith v. Thompson, 103 Idaho 909, 655 P.2d 116 (Ct.App.1982) (employer liable for encouraging employee to burn down plaintiff's house). See the scholarly discussion of civil aiding and abetting by Judge Wald in Halberstam v. Welch, 705 F.2d 472, 481-86 (D.C.Cir.1983), which reviews in detail the nature and scope of civil liability for aiding and abetting tortious conduct. 8 38 Plaintiffs have not argued that there is a private right of action under 18 U.S.C. Sec. 2. Moreover, this is not a securities case, and the predicate acts alleged are violations of the mail fraud statute, 18 U.S.C. Sec. 1341, not violations of the securities laws. We therefore proceed on the assumption that Count XII invokes the civil common law doctrine of aiding and abetting. 9 39 Applying the teaching of Mechanical Engineers in the aiding and abetting context, we note that one important purpose of RICO's civil provisions is to permit recovery by the victims of racketeering activity. One who has aided and abetted the commission of two predicate offenses is guilty of those offenses. Standefer v. United States, 447 U.S. 10, 100 S.Ct. 1999, 64 L.Ed.2d 689 (1980); United States v. Provenzano, 334 F.2d 678, 691 (3d Cir.1964); United States v. Kegler, 724 F.2d 190, 201 (D.C.Cir.1984) ([a]n individual can be indicted as a principal for commission of a substantive crime and convicted by proof showing him to be an aider and abettor). The doctrine of aiding and abetting is simply one way that an individual can violate the substantive criminal laws. See 18 U.S.C. Sec. 2 ([w]hoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal); Kegler, 724 F.2d at 200 (aiding and abetting ... is not an independent crime under 18 U.S.C. Sec. 2). So long as all of RICO's other requirements are met, we can see no reason why victims should not be able to recover from anyone who has committed the predicate offenses RICO enumerates, regardless of how he committed them. As a general matter, therefore, civil RICO liability for aiding and abetting will advance RICO's goals, and Mechanical Engineers-instructs us that the doctrine should therefore be applied in this context. 40 While many commentators have noted the difficulty of explaining the goals of the doctrine of respondeat superior, see W. Page Keeton, et al., Prosser & Keeton on Torts Sec. 69 at 500 text at note 6 (5th ed. 1984), the doctrine can probably be best explained as an outgrowth of the sentiment that it would be unjust to permit an employer to gain from the intelligent cooperation of others without being responsible for the mistakes, the errors of judgment and the frailties of those working under his direction and for his benefit. Restatement (Second) of Agency Sec. 219, comment a on subsection (1). 10 Here too the goals of the common law doctrine are entirely consistent with RICO's goal to facilitate recovery by the victims of racketeering activity. We therefore hold that the doctrine of respondeat superior may be applied under RICO where the structure of the statute does not otherwise forbid it. 41 As the foregoing qualification suggests, however, there are some circumstances in which both theories of liability are inconsistent with RICO's goals and operation. In particular, this and most other courts have held that for purposes of Sec. 1962(c) an enterprise may not be held liable under RICO. Hirsch v. Enright Refining Co., 751 F.2d 628 (3d Cir.1984); Haroco, Inc. v. American National Bank & Trust Co., 747 F.2d 384, 401-02 (7th Cir.1984); see Schreiber Distributing Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1396 n. 2 (9th Cir.1986) (collecting cases). The contrary rule has been adopted only by the Eleventh Circuit, in United States v. Hartley, 678 F.2d 961 (11th Cir.1982). 42 If the enterprise in a particular RICO case is also the employer of the RICO persons, respondeat superior liability may be inconsistent with the rule in Enright. That case would also suggest that a 1962(c) enterprise cannot have aided and abetted the RICO persons. Because the rule in Enright pertains only to Sec. 1962(c), however, the applicability of this argument to the complaint before us depends on which subsection of RICO each individual Count is brought under; whether that Count is brought against Western as a defendant, and whether or not Western is alleged to be an enterprise for purposes of that Count. Application of the rule in Mechanical Engineers--that common law doctrines will be applied in federal litigation to the extent that they advance the goals of the statutes sued under--will therefore require a detailed inspection of the bases on which each count of the complaint seeks to hold Western liable. For that reason we set out the following chart, which describes the six RICO counts for which Petro-Tech seeks to hold Western liable through the doctrines of respondeat superior and aiding and abetting liability. 43 Count names Western Western Sec. 1962 an as a subsection Count enterprise? defendant?  ------------------------------------------------------------------------------- I yes yes a II no yes a III yes (alternatively no c Western Petroleum Services the enterprise) IV no yes c V no (conspiracy yes d count) VI no (conspiracy no d count) ------------------------------------------------------------------------------- 44 All counts which name Western as a defendant also name it as a person. This 45 is consistent with the structure of Sec. 1962, under which liability is imposed 46 on persons who engage in racketeering activity. 47