Source: cases/18usc1962/us-507-170-reves-v-ernst-young.case
Case source: https://www.neochart.com/catalog/cases/us/volume_507/0170_01/index.html
In order to “participate, directly or indirectly, in the conduct of such enterprise’s affairs,” one must have some part in directing those affairs.
An enterprise is “operated” not just by upper management but also by lower rung participants in the enterprise who are under the direction of upper management. An enterprise also might be “operated” or “managed” by others “associated with” the enterprise who exert control over it as, for example, by bribery.
In sum, we hold that “to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs,” § 1962(c), one must participate in the operation or management of the enterprise itself.
We think that Arthur Young’s failure in this respect is not sufficient to give rise to liability under § 1962(c).
casedsl 1
case /us/507/0170-01
name Reves v. Ernst
cite 507 U.S. 170 (1993)
court Supreme Court of the United States
date 1993-03-03
url catalog/cases/us/volume_507/0170_01/index.html
source ir/caselaw/us_507.jsonl sha1=22ec29a770b7bb16c06699e79e47672607c17144 chars=48933
law 18usc1962 (c)
role applied
posture civil; summary judgment for the outside auditor on the RICO claim, affirmed by CA8; certiorari on the meaning of "conduct or participate ... in the conduct of such enterprise's affairs"
result claimant-lost
element conduct : not-satisfied [no-evidence]
party Arthur Young (outside accounting firm, later Ernst & Young), as to the Co-Op
variant operation-or-management/outside-auditor
fact @3759..3893 [supports] | Drozal concluded that the Co-Op had owned White Flame from the start and that the plant should be valued at $4.5 million on its books.
fact @4262..4416 [supports] | Arthur Young did not tell the board of its conclusion that the Co-Op always had owned White Flame or that without that conclusion the Co-Op was insolvent.
fact @4606..4743 [supports] | These included White Flame’s $4.5 million asset value among its total assets but omitted the information contained in the audit’s Note 9.
fact @24097..24226 [cuts-against] | In this case, it is undisputed that Arthur Young relied upon existing Co-Op records in preparing the 1981 and 1982 audit reports.
fact @29599..29695 [cuts-against absent] | it is clear that Arthur Young was not acting under the direction of the CoOp’s officers or board
rule @13559..13706 | In order to “participate, directly or indirectly, in the conduct of such enterprise’s affairs,” one must have some part in directing those affairs.
rule @21209..21518 | An enterprise is “operated” not just by upper management but also by lower rung participants in the enterprise who are under the direction of upper management. An enterprise also might be “operated” or “managed” by others “associated with” the enterprise who exert control over it as, for example, by bribery.
rule @23127..23334 | In sum, we hold that “to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs,” § 1962(c), one must participate in the operation or management of the enterprise itself.
held @24899..25012 | We think that Arthur Young’s failure in this respect is not sufficient to give rise to liability under § 1962(c).
gloss Auditor prepared audit reports and condensed statements from the client's own records and failed to disclose an insolvency-determining valuation choice; providing (even deficient) professional services to the enterprise is not taking part in directing it.
gloss Basis: summary judgment for the auditor, affirmed on facts the majority calls undisputed, hence [no-evidence] (was [law]); the step that decides the case is the statutory construction in the rule lines.
element enterprise : satisfied [assumed]
variant legal-entity/cooperative
fact @815..945 [supports] | The Farmer’s Cooperative of Arkansas and Oklahoma, Inc. (Co-Op), began operating in western Arkansas and eastern Oklahoma in 1946.
gloss The victim cooperative is the enterprise; its status as such is not in dispute.
element association : not-reached
gloss The Court notes "outsiders" may be liable if "associated with" the enterprise AND participating in its operation or management; whether Arthur Young was "associated with" the Co-Op is not separately decided.
element pattern : not-reached
element racketeering : not-reached
gloss A jury found securities fraud on the non-RICO counts; the predicate question was not before the Court.
element injury : not-reached
element causation : not-reached
misfit The dispositive holding is statutory construction (the operation-or-management test, a pure question of law); its APPLICATION was not contested here ("Neither petitioners nor the United States have argued that these courts misapplied" the test) and arrives as an affirmed summary judgment. The v1 basis table gives the block [no-evidence], which records the posture but hides that the element failed because of a newly announced legal test; one block cannot be both rule-announcing and applied, and one basis tag cannot carry both.
misfit The rule draws its line by reference to another element (association: "outsiders" associated with the enterprise) and other subsections ((a),(b) cover infiltration by outsiders); cross-element / cross-subsection scoping is not expressible.
misfit Open question expressly reserved (how far down "the ladder of operation" (c) reaches for low-level employees) has no slot; it lives in a footnote appended to the opinion text.
misfit Dissent (Souter, White) would find the element satisfied on the same facts (auditor created the financial statements = management's function) and disputes the "undisputed" record-reliance fact. v1 has `scope dissent`, but no dissent quote was captured and the quote set is frozen, so it is still not represented. Header name is truncated by the IR ("Reves v. Ernst").