PRACTICE SERIES RICO A Guide to Civil RICO Litigation in Federal Courts EDITORS Reid J. Schar E.K. McWilliams Philip B. Sailer © Copyright 2021 Jenner & Block LLP. Jenner & Block is an Illinois Limited Liability Partnership including professional corporations. JENNER & BLOCK LLP OFFICES ▪ 353 North Clark Street Chicago, Illinois 60654-3456 Firm: 312 222-9350 Fax: 312 527-0484 ▪ 25 Old Broad Street London EC2N 1HQ United Kingdom Firm: +44 (0) 330 060 5400 Fax: +44 (0) 330 060 5499 ▪ 633 West 5th Street, Suite 3600 Los Angeles, California 90071-2054 Firm: 213 239-5100 Fax: 213 239-5199 ▪ 919 Third Avenue, 37th Floor New York, New York 10022-3908 Firm: 212 891-1600 Fax: 212 891-1699 ▪ 455 Market Street, Suite 2100 San Francisco, CA 94105-2453 Firm: 628 267-6800 Fax: 628 267-6859 ▪ 1099 New York Avenue, NW, Suite 900 Washington, D.C. 20001-4412 Firm: 202 639-6000 Fax: 202 639-6066 WEBSITE: www.jenner.com © 2021 Jenner & Block LLP. This publication is not intended to provide legal advice but to provide general information on legal matters. Transmission is not intended to create and receipt does not establish an attorney-client relationship. Readers should seek specific legal advice before taking any action with respect to matters mentioned in this publication. The attorney responsible for this publication is Reid J. Schar. ATTORNEY ADVERTISING Contributing Editors & Acknowledgments Contributing Editors: The following current and former Jenner & Block attorneys and law clerks made important contributions to the 2021 RICO Guide: Shanna Rifkin, David Sussman, Jason Bradford, Carla Weiss, Seth Agata, James Malysiak, Carissa Coze, Alexander Cottingham, Jeremy Ershow, William Von Hoene, Matthew Feldhaus, Amit Patel, Jing Xun Quek, William Williams, Eric Fleddermann, Theo Lesczynski, Deepthika Appuhamy, Emily Merrifield, Sara Crook, Rachel Foster, Margaret Hlousek, Brittany Lamb, Anna Margasinska, Adam Caldwell, Michael DeMar, Alexander Ghantous, Pejman Yousefzadeh, Garrett Fitzsimmons, Charles Carlin, Karolina Bartosik, and Jocelyn Sitton. Additional Acknowledgments: Special thanks to DLA Piper attorneys John Hamill, Justin Kerner, Samantha Bent, Randy Bruchmiller, Juan Godinez, Aaron Goodman, Isha Mehmood, and Zak Shirley for their invaluable help in updating this version of the Civil RICO Guide. A Guide to Civil RICO Litigation in Federal Courts Reid J. Schar E.K. McWilliams Philip B. Sailer TABLE OF CONTENTS I. INTRODUCTION............................................................................................................. 1 § 1 Scope Note .............................................................................................................. 1 II. ELEMENTS COMMON TO ALL CIVIL RICO ACTIONS....................................... 4 § 2 Overview ................................................................................................................. 4 § 3 The Culpable “Person” ........................................................................................... 6 § 4 Mental State .......................................................................................................... 10 § 5 Racketeering Activity ........................................................................................... 12 § 6 Issues Relating to Mail and Wire Fraud as Predicate Acts ................................... 13 § 7 Predicates Based on Securities Fraud Generally Prohibited ................................. 16 § 8 Extortion as a Predicate Act .................................................................................. 18 § 9 Controlled Substances Act as a Predicate Act ...................................................... 20 § 10 National Stolen Property Act as a Predicate Act .................................................. 21 § 11 Interstate or Foreign Commerce ........................................................................... 22 § 12 Economic Motive .................................................................................................. 23 III. PATTERN OF RACKETEERING ............................................................................... 26 § 13 Background ........................................................................................................... 26 § 14 The H.J. Inc. “Pattern” Requirement—Relatedness and Continuity .................... 33 § 15 The “Pattern” Requirement After H.J. Inc.—Relatedness, Closed-Ended Continuity, and Open-Ended Continuity .......................................................................... 35 § 16 Constitutional Challenges ..................................................................................... 50 § 17 Collection of Unlawful Debt ................................................................................. 51 IV. SECTION 1962(c): THE RICO ENTERPRISE .......................................................... 54 § 18 Overview ............................................................................................................... 54 § 19 Association-in-Fact Enterprise.............................................................................. 55 § 20 The Person/Enterprise Distinction ........................................................................ 63 § 21 Intracorporate Enterprises ..................................................................................... 65 § 22 Vicarious Liability ................................................................................................ 68 § 23 Operation or Management of the Enterprise ......................................................... 72 § 24 Application of the “Operation or Management” Test to Outsiders ...................... 76 i § 25 Liability for Aiding and Abetting ......................................................................... 80 § 26 The Enterprise Under §§ 1962(a), (b), and (d) ..................................................... 83 V. STANDING UNDER § 1962(c) ...................................................................................... 85 § 27 Background ........................................................................................................... 85 § 28 Person .................................................................................................................... 86 § 29 Injury to Business or Property .............................................................................. 89 § 30 Injuries to Intangible Assets.................................................................................. 90 § 31 Personal Injuries.................................................................................................... 92 § 32 Predominance of the Injury to Business or Property ............................................ 94 § 33 Causation: “By Reason Of” .................................................................................. 94 § 34 The Question of Reliance ...................................................................................... 97 § 35 Standing for Predicate Acts .................................................................................. 99 § 36 Specific Standing/Causation Issues and Applications ........................................ 100 § 37 Whistle-Blowers ................................................................................................. 100 § 38 “Loss Causation” and RICO Claims by Investors .............................................. 101 § 39 Shareholders ........................................................................................................ 103 § 40 Competitors ......................................................................................................... 104 § 41 Utility Customers ................................................................................................ 107 § 42 Union Members .................................................................................................. 108 § 43 Thrift Depositors ................................................................................................. 109 § 44 Taxpayers and Tax Collectors ............................................................................ 109 VI. SECTION 1962(a): INVESTMENT OF RACKETEERING INCOME ................. 109 § 45 Investment of Racketeering Income ................................................................... 109 § 46 Standing Under § 1962(a) ................................................................................... 111 VII. SECTION 1962(b): ACQUISITION OF CONTROL OF ENTERPRISE .............. 116 § 47 Acquisition of an “interest in or control of” an Enterprise ................................. 116 § 48 Standing Under § 1962(b) ................................................................................... 118 VIII. SECTION 1962(d): RICO CONSPIRACY ................................................................ 123 § 49 Basic Elements .................................................................................................... 123 § 50 Agreement Concerning the Conspiracy .............................................................. 124 § 51 The Knowledge Requirement ............................................................................. 126 § 52 The Need For a Violation of § 1962(a), (b), or (c) ............................................. 127 § 53 Conspiracy Among Corporate Agents ................................................................ 128 § 54 Standing Under § 1962(d) ..................................................................................