Court Opinion

ID: 8414940
Source: CourtListenerOpinion
Date Created: 2022-11-02 21:24:32.212477+00
Date Added: 2024-06-11T16:48:10.905031
License: Public Domain

Woods, District Judge,
concurring in part and concurring in the judgment:
I concur in the judgment because I am persuaded that this conclusion is mandated by the Second Circuit’s decision in Cruz v. FXDirectDealer, LLC, 720 F.3d 115 (2013). I write separately only because the decision to reaffirm the approach this Circuit took to the application of the “distinctness” principle in this context prior to Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 121 S.Ct. 2087, 150 L.Ed.2d 198 (2001), was made four years ago by the panel in 'Cruz. Given that we are not working with a blank canvas—Cruz dictates the outcome here—I decline to paint in an analysis here to reconcile the court’s decision in Cruz with Cedric.1 As a result, I do not join in the discussion on pages 19 to 22 of this decision describing how the Supreme Court’s ruling in Cedric supports this conclusion.
Cruz reaffirmed the principle that “corporations that are legally separate but ‘operate within a unified corporate structure’ and ‘guided by a single corporate consciousness’ cannot be both the ‘enterprise’ and the ‘person’ under § 1962(c).” Cruz, 720 F.3d at 121. In support, Cruz cited to the Second Circuit’s 1996 decision in Discon, Inc. v. NYNEX Corp., 93 F.3d 1055 (2d Cir. 1996), vacated on other grounds, 525 U.S. 128, 119 S.Ct. 493, 142 L.Ed.2d 510 (1998). In reaffirming the rule established in Discon, the opinion in Cruz did not analyze the impact of the Supreme Court’s intervening decision in Cedric on *210the Circuit’s approach to the “distinctness” principle. The analysis of Cedric presented in this case—limiting the Supreme Court’s holding in Cedric to its facts, applicable only to distinctness analysis involving an individual owner and her wholly-owned corporation, and equating a separately organized subsidiary of a corporation to an “agent or employee” of a corporation—was not stated overtly in Cruz.
Nor did Cruz expressly grapple with the Second Circuit’s first decision addressing the distinctness principle following Cedric—City of New York v. Smokes-Spirits.com, Inc., 541 F.3d 425 (2d Cir. 2008). In Smokes-Spirits, the panel described the Supreme Court’s holding in Cedric in a way that is at least arguably broader than the approach reaffirmed in Cruz. The Smokes-Spirits court wrote:
In Cedric Kushner, the Supreme Court explained that the RICO “person” and alleged “enterprise” must be only legally, and not necessarily actually, distinct. ... The City has alleged ... that the enterprise is an innocent corporation, with its own legal basis for existing, and the persons are employees or officers of the organization unlawfully directing the enterprise’s racketeering activities.
Id. at 448. In light of this language, I understand why Judge Seibel, writing before Cruz was handed down, reached her initial conclusion regarding the proper application of the distinctness principle after Cedric. U1IT4Less, Inc. v. FedEx Corp., 896 F.Supp.2d 275, 288 (S.D.N.Y. 2012).
I emphasize too that in affirming the ruling below, we are not endorsing the test applied by Judge Forrest in her opinion, namely “whether the fact of separate incorporation facilitated the alleged unlawful activity.” Judge Forrest derived the “facilitation” test from the Seventh Circuit’s ruling in Bucklew v. Hawkins, Ash, Baptie & Co., 329 F.3d 923 (2003). While Bucklew has been cited favorably by a number of courts evaluating this issue, the test has no foundation in the jurisprudence of the Second Circuit, and the application of existing circuit doctrine suffices to resolve this case.2

. As the opinion notes, our Circuit’s approach in Cruz, which cabins the Supreme Court’s decision in Cedric to its facts, is consistent with that taken by a number of other federal courts. Several commenters have remarked on this trend. See, e.g., William B. Ortman, Parents, Subsidiaries, and RICO Distinctiveness, 73 U. Chi. L. Rev. 377, 398 (2006) (arguing that circuit courts have "ignored the Supreme Court’s repeated directives against the use of purposive interpretation to extra-textually cabin RICO liability”); Laurence A. Steckman, RICO Section 1962(c) Enterprises and the Present Status of the "Distinctness Requirement" in the Second, Third and Seventh Circuits, 21 Touro L. Rev. 1082, 1296 (2006) (observing that "Cedric ... plainly stated that bare legal distinctness is all the 'distinctness’ RICO requires.... The Second, Third and Seventh Circuits, plainly, remain committed to their pre-Cedric analytical paradigms.”).

. While decided two years after Cedric, Buck-lew does not mention the Supreme Court’s decision in its analysis. Moreover, the single paragraph of analysis of this issue in Bucklew relies on cases involving the Sherman Act, principally Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984). Bucklew, 329 F.3d at 934. In Cedric, Mr. King argued that Copper-weld supported a ruling in his favor. The Supreme Court rejected that argument, stating that its conclusion that legal separateness was all that was required by RICO was not "inconsistent with antitrust law’s intracorpo-rate conspiracy doctrine; that doctrine turns on specific antitrust objectives." Cedric, 533 U.S. at 166, 121 S.Ct. 2087.