Source: cases/18usc1962/f-supp-567-1146-seville-industrial-machinery-v-southmost-machinery.case
Case source: https://www.neochart.com/catalog/cases/f-supp/volume_567/1146_01/index.html
The Third Circuit held that the first requirement of an “ongoing organization” is a showing that a structure exists for group decision making, whether it be hierarchial or consensual.
If it were to be determined that an “enterprise” is sufficiently pleaded whenever a plaintiff avers that any two or more otherwise unassociated individuals agree to commit two or more acts of business fraud, this would effectively eliminate the enterprise element of RICO and drastically expand federal jurisdiction over all business torts which involve use of the mails or telephones.
For all the above reasons, I find that the First Count of plaintiff’s complaint is deficient since it fails to allege the existence of an “ongoing organization” which is the first element of the RICO “enterprise” requirement.
The Court explained that each person must perform a role in the group which is consistent with the enterprise’s organizational structure and which furthers the activities of the organization.
This is simply not sufficient to aver a “continuing unit functioning for a common purpose.”
As the Third Circuit interprets this third requirement, it is necessary for the plaintiff to show that the enterprise has an existence beyond that which is necessary merely to commit the alleged predicate racketeering offenses.
I find that the First Count of plaintiff’s complaint fails to satisfy the separate existence requirement since it pleads the existence of an “enterprise” which is apparently synonymous with the defendants’ alleged “pattern of racketeering activity.”
A corporation such as Southmost and Tri-State could not employ itself or associate with itself.
It is unnecessary to reach this question, however.
The elements of an indictable offense under the federal mail and wire fraud statutes are: (1) a scheme designed to defraud or to obtain money or property by false pretenses and (2) use of the mails or interstate wires (including interstate telephone calls) in furtherance of the fraudulent scheme.
I find that this lack of specificity caused plaintiff’s allegations of mail fraud and wire fraud to be deficient.
plaintiff must allege that defendants transported or caused to transport with unlawful and fraudulent intent and with knowledge that the property was fraudulently obtained
For the above reasons, I find plaintiff’s allegations of interstate transportation of fraudulently obtained goods to be deficient.
It appears from the definition of “pattern of racketeering activity” that any combination of two listed offenses may constitute a “pattern” for RICO purposes.
The First Count of plaintiff’s complaint will be dismissed because it fails to allege at least two acts of racketeering activity with sufficient particularity and thus fails to allege that defendants engaged in a “pattern of racketeering activity” as required by 18 U.S.C. § 1962.
The Court stated that an agreement merely to commit the predicate offenses would not be sufficient to support a RICO conspiracy.
Therefore, the First Count of plaintiff’s complaint fails to allege that defendants violated Section 1962(d), the conspiracy subsection of RICO.
However, this judicially imposed requirement of a “racketeering enterprise injury” seems artificial and unwarranted by the language of the RICO statute.
The First Count of the complaint clearly alleges that plaintiff suffered direct injury from defendants’ alleged racketeering activity and will not be dismissed for its failure to allege a separate and distinct “racketeering injury.”
casedsl 1
case /f-supp/567/1146-01
name Seville Industrial Machinery Corp. v. Southmost Machinery Corp.
cite 567 F. Supp. 1146 (1983)
court United States District Court for the District of New Jersey
date 1983-07-08
url catalog/cases/f-supp/volume_567/1146_01/index.html
source ir/caselaw/f_supp_567.jsonl sha1=71e63ee628a68a5956cfdf60dea4e9582342b8b0 chars=38927
law 18usc1962 (b),(c),(d)
role applied
posture civil; district court; defendants' motion to dismiss the RICO count under Rules 9(b) and 12(b)(6)
result claimant-lost
element enterprise : not-satisfied [pleaded]
party Southmost, Tri-State, Gellman and Alfieri (two corporations and two officers), individually or collectively
variant association-in-fact/defendants-merely-named-as-enterprises
fact @8537..8801 [cuts-against absent] | First, plaintiff merely asserts that “defendants Southmost, Tri-State, Gellman and Alfieri are enterprises” (eomplaint, First Count, ¶ 17) without clarifying whether all four defendants comprise one enterprise or whether each defendant constitutes an “enterprise.”
fact @10020..10229 [cuts-against absent] | Aside from assertions that the four defendants conspired with each other and committed numerous fraudulent acts, plaintiff does not mention any identifiable structure which would encompass all four defendants.
fact @14712..14885 [cuts-against absent] | In fact, defendant Alfieri is only alleged to be an officer and controlling person of defendant Southmost and is not alleged to have any connection with defendant Tri-State.
rule @8079..8262 | The Third Circuit held that the first requirement of an “ongoing organization” is a showing that a structure exists for group decision making, whether it be hierarchial or consensual.
rule @12825..13210 | If it were to be determined that an “enterprise” is sufficiently pleaded whenever a plaintiff avers that any two or more otherwise unassociated individuals agree to commit two or more acts of business fraud, this would effectively eliminate the enterprise element of RICO and drastically expand federal jurisdiction over all business torts which involve use of the mails or telephones.
held @15169..15394 | For all the above reasons, I find that the First Count of plaintiff’s complaint is deficient since it fails to allege the existence of an “ongoing organization” which is the first element of the RICO “enterprise” requirement.
gloss Bare label "defendants are enterprises"; an alleged conspiracy to defraud is not itself an enterprise. Also holds a group of corporations + individuals is not a "group of individuals associated in fact". (Reversed on appeal, 742 F.2d 786 (3d Cir. 1984) -- annotator's knowledge, not in this text.)
element enterprise.continuing-unit : not-satisfied [pleaded]
variant continuing-unit/no-common-purpose-or-roles-alleged
fact @16774..16989 [supports] | Plaintiff merely alleges that from May 1981 to the date of the complaint, the defendants conspired to defraud plaintiff in connection with the title, purchase, shipment, and sale of plaintiff’s industrial machinery.
fact @16669..16773 [cuts-against absent] | Nor does plaintiff allege the individual roles that each of the defendants played within the enterprise.
rule @16272..16463 | The Court explained that each person must perform a role in the group which is consistent with the enterprise’s organizational structure and which furthers the activities of the organization.
held @17379..17470 | This is simply not sufficient to aver a “continuing unit functioning for a common purpose.”
element enterprise.distinct-from-pattern : not-satisfied [pleaded]
variant distinct-from-pattern/enterprise-defined-only-by-predicate-acts
fact @18371..18560 [cuts-against] | In fact, the alleged “enterprise” involving Southmost, Tri-State, Gellman, and Alfieri only can be understood in terms of the fraudulent acts that plaintiff claims the defendants committed.
rule @17774..18001 | As the Third Circuit interprets this third requirement, it is necessary for the plaintiff to show that the enterprise has an existence beyond that which is necessary merely to commit the alleged predicate racketeering offenses.
held @18597..18846 | I find that the First Count of plaintiff’s complaint fails to satisfy the separate existence requirement since it pleads the existence of an “enterprise” which is apparently synonymous with the defendants’ alleged “pattern of racketeering activity.”
element person : not-reached
role rule-announced
variant distinct-from-enterprise/defendants-named-as-both-person-and-enterprise
fact @18960..19064 [cuts-against] | Plaintiff alleges that defendants are both the “enterprise” and the racketeers operating the enterprise.
rule @9355..9450 | A corporation such as Southmost and Tri-State could not employ itself or associate with itself.
held @21884..21934 | It is unnecessary to reach this question, however.
gloss Court doubts the Third Circuit requires person/enterprise distinctness as a "fourth element" and leaves it open, though it reasons elsewhere that a single-person enterprise cannot violate (b) or (c).
element racketeering.mail-fraud : not-satisfied [pleaded]
count mail fraud and wire fraud (treated together)
variant rule-9b-particularity/no-who-what-when-where-how
fact @2223..2487 [supports] | It is further asserted that Southmost and Tri-State, acting through their controlling persons Gellman and Alfieri, by means of fraudulent and misleading information induced plaintiff to sell or transfer possession of plaintiff’s machinery to defendants for resale.
fact @3224..3389 [supports] | According to the complaint, defendants have retained for their own use the money which they have received from these dealings instead of paying it over to plaintiff.
fact @28615..28741 [cuts-against absent] | Plaintiff fails to describe the date, place, or time of any phone calls or letters or other forms of interstate communication.
rule @27057..27354 | The elements of an indictable offense under the federal mail and wire fraud statutes are: (1) a scheme designed to defraud or to obtain money or property by false pretenses and (2) use of the mails or interstate wires (including interstate telephone calls) in furtherance of the fraudulent scheme.
held @28875..28988 | I find that this lack of specificity caused plaintiff’s allegations of mail fraud and wire fraud to be deficient.
gloss Use of mails/wires "in furtherance" and >=2 acts within ten years WERE adequately alleged; the failure is only Rule 9(b) particularity (no dates, places, contents).
element racketeering.stolen-property : not-satisfied [pleaded]
variant interstate-transport-of-fraud-proceeds/value-and-knowledge-not-alleged
fact @26610..26816 [supports] | Plaintiff further alleges that since May 1981 defendants have transported and sold or caused to be transported and sold in interstate commerce, the industrial machinery fraudulently obtained from plaintiff.
fact @30396..30539 [cuts-against absent] | However, the complaint does not specify whether defendants transported or caused to transport over $5,000 worth of fraudulently obtained goods.
rule @29850..30021 | plaintiff must allege that defendants transported or caused to transport with unlawful and fraudulent intent and with knowledge that the property was fraudulently obtained
held @31038..31168 | For the above reasons, I find plaintiff’s allegations of interstate transportation of fraudulently obtained goods to be deficient.
element pattern : not-satisfied [pleaded]
variant predicate-acts/predicates-insufficiently-pleaded
rule @26020..26178 | It appears from the definition of “pattern of racketeering activity” that any combination of two listed offenses may constitute a “pattern” for RICO purposes.
held @31169..31449 | The First Count of plaintiff’s complaint will be dismissed because it fails to allege at least two acts of racketeering activity with sufficient particularity and thus fails to allege that defendants engaged in a “pattern of racketeering activity” as required by 18 U.S.C. § 1962.
gloss Pattern fails derivatively: no adequately pleaded predicate acts. Pre-Sedima/H.J. view that any two listed offenses make a pattern.
element conspiracy : not-satisfied [pleaded]
variant agreement/only-to-commit-predicates-not-to-further-enterprise
fact @24628..24882 [cuts-against absent] | Although plaintiff does allege that defendants conspired to commit mail fraud and wire fraud, plaintiff fails to allege a RICO conspiracy since it does not state that defendants made their agreement in order to further the affairs of a RICO “enterprise.”
rule @23725..23853 | The Court stated that an agreement merely to commit the predicate offenses would not be sufficient to support a RICO conspiracy.
held @24883..25027 | Therefore, the First Count of plaintiff’s complaint fails to allege that defendants violated Section 1962(d), the conspiracy subsection of RICO.
element injury : satisfied [pleaded]
variant direct-injury/no-separate-racketeering-injury-required
fact @30293..30395 [supports] | In the instant case, plaintiff alleges that it has suffered business and property damages of $759,039.
rule @32442..32594 | However, this judicially imposed requirement of a “racketeering enterprise injury” seems artificial and unwarranted by the language of the RICO statute.
held @33827..34059 | The First Count of the complaint clearly alleges that plaintiff suffered direct injury from defendants’ alleged racketeering activity and will not be dismissed for its failure to allege a separate and distinct “racketeering injury.”
gloss Defendants framed this as causation ("by reason of"); the court treats it as the racketeering-injury question and rejects the extra requirement.
element acquisition : not-reached
gloss (b) pleaded but falls with the enterprise element; no separate analysis beyond noting a person cannot acquire an interest in himself.
element conduct : not-reached
element commerce : not-reached
misfit Two independent grounds mixed in one holding: substantive insufficiency (12(b)(6): no enterprise) and Rule 9(b) lack of particularity (fraud predicates). [pleaded] cannot distinguish "allegations taken as true are legally insufficient" from "allegations too vague to evaluate"; a basis like `unparticularized` would help.
misfit Partial success inside a failing element: for mail/wire fraud the court finds use-of-mails-in-furtherance, the two-act count, and the ten-year window adequately pleaded, yet the predicate fails on particularity. No per-sub-requirement holding without inventing more dotted ids.
misfit The court splits `enterprise` into a three-part test (ongoing organization / continuing unit / separate from pattern) plus a doubted fourth (separate from the racketeers). enterprise.continuing-unit and enterprise.distinct-from-pattern are now declared in the .law file; "ongoing organization" still has no sub-id and sits on the bare `enterprise` id.
misfit Derivative failures (pattern fails because predicates fail; (d) and (b),(c) fail because enterprise fails) are dependency edges between elements, not independent holdings.
misfit Subsequent history (reversed in relevant part by the Third Circuit, 742 F.2d 786) and superseded doctrine (ascertainable-structure test narrowed by Boyle) cannot be recorded; a reader would take these variants as good law.
misfit Policy dictum on the "scope of RICO" (garden-variety business fraud) is explicitly not decided and has no slot.