Reves v. Ernst

507 U.S. 170 (1993) Supreme Court of the United States 1993-03-03

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)

Facts

  1. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact satisfied assumed
    The Farmer’s Cooperative of Arkansas and Oklahoma, Inc. (Co-Op), began operating in western Arkansas and eastern Oklahoma in 1946.
  2. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not no-evidence
    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.
  3. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not no-evidence
    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.
  4. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not no-evidence
    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.
  5. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not no-evidence
    In order to “participate, directly or indirectly, in the conduct of such enterprise’s affairs,” one must have some part in directing those affairs.
  6. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not no-evidence
    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.
  7. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not no-evidence
    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.
  8. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not no-evidence
    In this case, it is undisputed that Arthur Young relied upon existing Co-Op records in preparing the 1981 and 1982 audit reports.
  9. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not no-evidence
    We think that Arthur Young’s failure in this respect is not sufficient to give rise to liability under § 1962(c).
  10. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not no-evidence
    it is clear that Arthur Young was not acting under the direction of the CoOp’s officers or board