ARTICLE: THE RICO CIVIL FRAUD ACTION IN CONTEXT: REFLECTIONS ON BENNETT v. BERG

G. Robert Blakey *

* Professor of Law, Notre Dame Law School. A.B. 1957, J.D. 1960, Notre Dame. Professor Blakey was the Chief Counsel of the Senate Subcommittee on Criminal Laws and Procedures of the United States Senate in 1969-1970, when the Organized Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 941 (1970), was processed.

SUMMARY:
  ... In Bennett v. Berg, the United States Court of Appeals for the Eighth Circuit, as a matter of "first impression in the Circuit Courts of Appeals," faced and resolved a number of significant issues in the construction of Title IX, the Racketeer Influenced and Corrupt Organizations (hereinafter "RICO") provisions of the Organized Crime Control Act of 1970. ... The Legislative History of RICO ... Noting that the bill "incorporated," inter alia, the recommendations of the ABA, he reviewed for the Senate, as he had done on March 11, the scope and impact of organized crime in the United States and discussed the various titles of the bill, concentrating on Title IX, now entitled "Racketeer Influenced and Corrupt Organizations (RICO)," on the infiltration of businesses and unions, and specifically noting such activities as bankruptcy fraud, the theft of securities and their fraudulent pledging, and the counterfeiting of hit records. ... (3) Both immediate victims of racketeering activity and competing organizations were contemplated as civil plaintiffs for injunction, damage, and other relief; ... Several actions had in fact been dismissed on a variety of grounds, including a failure to allege an "organized crime" or a "racketeering" connection, the failure to allege a predicate offense, the novel character of the theory of the violation of the predicate offense alleged, the failure to allege a "pattern" of racketeering activity, the failure to allege a "competitive" or "racketeering enterprise" injury, and the failure to distinguish in the complaint between the "person" and the "enterprise." ...  

TEXT:
     [*237]  I. Introduction

[T]he office of all the Judges is always to make such . . . construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuation of the mischief, . . . and to add force and life to the cure and remedy, according to the true intent of the makers of the Act pro bono publico.

Heydon's Case, 76 Eng. Rep. 637, 638 (Ex. 1584).

In Bennett v. Berg, ¹ the United States Court of Appeals for the Eighth Circuit, as a matter of "first impression in the Circuit Courts of Appeals," ² faced and resolved a number of significant issues in the construction of Title IX, the Racketeer Influenced and Corrupt Organizations (hereinafter "RICO") provisions of the Organized Crime Control Act of 1970. ³ In Bennett, the plaintiffs, residents in a "life  [*238]  care" retirement village, sought treble damages and equitable relief under 18 U.S.C. § 1964 from a number of defendants, including named individuals, a not-for-profit corporation, the John Knox Village, attorneys, accountants, the firm of Snyder, Ernst & Muehling, and the Prudential Life Insurance Company, a mortgage lender. The district court dismissed the complaint, and an appeal was taken. On appeal, the defendants sought to sustain the dismissal by arguing that:

(1) no allegation of a connection between organized crime and the plaintiffs had been made;

(2) no allegation of a culpable "person" separate from the charged "enterprise" had been made;

(3) no allegation of an "enterprise" separate from the charged "pattern of racketeering activity" had been made;

(4) no allegation of a "pattern of racketeering" had been made;

(5) no allegation of "investment," "acquisition," or an association with the "conduct" of an enterprise through a pattern of racketeering activity had been made;

(6) no allegation of a cognizable "injury" had been made; and

(7) the equitable relief sought was not available to private plaintiffs. ⁴

The court of appeals reversed in part and affirmed in part the district court's dismissal of the complaint. Because the Bennett court's decision represents the first comprehensive effort by a court of appeals to treat a number of important issues regarding the construction of RICO in the context of civil litigation, it merits extended comment. ⁵ Before  [*239]  examining the court of appeals' opinion in that case, however, this article will discuss the facts of the case, the text of RICO, the legislative history of RICO, and the jurisprudence under RICO.

II. The Facts of Bennett v. Berg ⁶

The plaintiffs in Bennett alleged to be present and former residents, 423 in number, of the John Knox Village retirement community in Lee's Summit, Missouri. ⁷ Owned and operated by a not-for-profit corporation, the John Knox Village is the "largest retirement community of its kind in the country." ⁸ The residential community consisted of approximately 2,500 residents, who occupied units in the facility pursuant to "Occupancy Agreement" contracts. In return for the payment of an initial lump sum -- an "Entrance Endowment" -- the residents were entitled to occupy specific apartments for life. Endowments paid ranged from $ 9,000 to more than $ 50,000. In addition, the "Occupancy Agreement" provided for the payment of a monthly lodging and service charge, "in such amounts as determined by the Board of Directors of the Village." ⁹ More than fifty million dollars has been paid in endowments or collected in monthly fees. ¹⁰ The monthly charge was to cover fifty-one services and facilities, including tray and diet service, building and grounds maintenance, scheduled transportation, laundry service, and various forms of medical care. According to the complaint, the Village was also "promoted as being a religiously or spiritually oriented, Christian community." ¹¹

The plaintiffs alleged, however, that the Village was in fact on  [*240]  the verge of bankruptcy, that service had markedly deteriorated, and that they faced the loss of the "life care" that they had expected and would have received but for the "fraud . . . in the inducement of residents to live in the community and in the operation of the Village." ¹²

According to the complaint, the various defendants, through the use of the mails, had fraudulently promoted the retirement community with materially false statements relating to its financial soundness. In addition, the lawyers, accountants, and the mortgage lender were alleged to have conspired to conceal from the plaintiffs the fraudulent promotion and operation of the Village, which included a pattern of self-dealing in breach of fiduciary duties. The complaint was drafted in eleven counts, two of which were premised on RICO, the rest of which were premised, under principles of pendent jurisdiction, on theories of common law fraud, breach of fiduciary duties, and specific Missouri statutes. Count I, a RICO count, prayed for treble damages, costs, and attorneys fees; Count II, a RICO count as well, prayed for equitable relief, including, if appropriate, the reorganization of the Village.

III. The Text of RICO

As the Supreme Court has repeatedly noted, the scope of a statute is to be determined in the first instance by examining its text. ¹³ Section  [*241]  1964(c) of RICO authorizes "[a] person injured in his business or property by reason of a violation of Section 1962" to "sue." ¹⁴ A congressional grant of the right to sue conveys, in the absence of statutory limitations, the availability of all necessary and appropriate relief. Significantly, the right to sue clause of section 1964(c) reads "sue and," not "sue to." ¹⁵ Accordingly, all necessary and appropriate relief is included in the text of section 1964(c). Recovery of treble damages, costs, and attorney's fees is explicitly added.

Under section 1961(3), "person" is defined to include "any . . . entity capable of holding a legal or beneficial interest in property." ¹⁶ On its face, the text of section 1964 contains no modifiers. ¹⁷ It is difficult  [*242]  to see, therefore, how the plaintiffs in Bennett could have been excluded from the class of "persons" entitled to sue under it. The moneys obtained by the defendants through the alleged fraud, moreover, constituted "property." ¹⁸ Accordingly, it is also difficult to see how the plaintiff's injuries could have been excluded from the class of injuries meriting relief under section 1964(c).

Section 1962 ¹⁹ is violated by "any person . . . associated with  [*243]  any enterprise . . . the activities of which affect . . . commerce, conduct[ing] . . . [the] enterprise's affairs through a pattern of racketeering activity. . . ." ²⁰ As noted above, the definition of a "person," is, of course, not limited by language in the text of the statute. "Enterprise," too, is defined to include "any corporation." ²¹ "Pattern[ed]"  [*244]  activity means activity that is not "isolated" or "sporadic," but is "continu[ous] and relat[ed]." ²² Finally, "racketeering activity" may be conducted "through" the offense of "mail fraud." ²³

As such, the possible application of RICO to the fact pattern alleged by the plaintiffs in Bennett should have been considered "neither absurd nor surprising." ²⁴ If there were thought to be any  [*245]  ambiguity in the language of RICO, moreover, it should have been "liberally construed to effectuate its remedial purposes." ²⁵ In addition,  [*246]  the application of RICO to the facts alleged would have been  [*247]  fully consistent with RICO's express purpose and statutorily stated findings of fact. ²⁶ Congress found that "organized" criminal "activity" used "fraud" to "drain" "dollars" from the American economy  [*248]  and to "harm innocent investors." ²⁷ Congress, therefore, passed RICO to "provid[e] enhanced sanctions and new remedies." ²⁸ "Nothing on the face of . . . [RICO] suggests a congressional intent to limit its coverage. . . ." ²⁹ In fact, the "words do not lend themselves to restrictive interpretation." ³⁰ "The language of the statute . . . [is] the most reliable evidence of its intent. . . ." ³¹ "[I]n the absence of a clearly expressed legislative intent to the contrary, that language must ordinarily be regarded as conclusive." ³² Obviously, no contrary legislative intent was expressed on the face of RICO. It is appropriate, therefore, to determine if any was expressed in its legislative history. ³³

 [*249]  IV. The Legislative History of RICO

A. The Origins of the Ideas in RICO

After the Special Committee to Investigate Organized Crime in Interstate Commerce (the Kefauver Committee) disclosed in 1951 the problem of organized crime's infiltration into legitimate business and state and local government, ³⁴ the American Bar Association ("ABA"), in response to a request of the chairman of the Special Committee, Senator Estes Kefauver, established the ABA Commission on Organized Crime. ³⁵ The Commission examined various legislative proposals to strengthen the law as it dealt with organized crime, including measures that recognized that "money . . . [was] the key to power in the underworld." ³⁶ By 1960, the problem of criminal infiltration into labor unions had been fully documented by the Senate Select Committee on Improper Activities in the Labor or Management Field (the McClellan Committee). ³⁷ Hearings, too, had been held exposing the structure of the national syndicate of organized crime known as the Mafia or La Cosa Nostra. ³⁸ In addition, the Department of Justice had begun to move against racketeer infiltration of various unions by imaginatively utilizing antitrust theories. ³⁹ Accordingly,  [*250]  the pervasive problem of organized crime ⁴⁰ and racketeering ⁴¹ in the world of government, business, and unions ⁴²  [*251]  was well-known by 1967, when the President's Commission on Law  [*252]  Enforcement and the Administration of Justice (the Katzenbach Commission) made its monumental report and recommended a comprehensive crime control strategy. ⁴³ Among other things, the Commission  [*253]  analyzed various aspects of organized crime, ⁴⁴ but it paid special attention to infiltration of legitimate business. ⁴⁵ It recommended the use of new approaches to control such infiltration. ⁴⁶ Finally, the fundamental reexamination of federal criminal jurisprudence undertaken between 1966 and 1971 by the National Commission on Reform of the Federal Criminal Law (the Brown Commission) developed significant insights into the character of the issues that faced the Congress. ⁴⁷

B. The Initial Stages of the Legislative Process

In 1967 Senator Roman L. Hruska proposed bills S. 2048 and S. 2049 to implement aspects of the Katzenbach Commission's recommendations, particularly the suggestion that antitrust theories be  [*254]  brought to bear on organized crime. ⁴⁸ As originally introduced, S. 2048 focused on the use of unreported income from one line of business in another line of business, while S. 2049 dealt with the "investment" of proceeds from "criminal activity" in a "business enterprise." ⁴⁹ Congressman Richard H. Poff introduced companion bills in the House. ⁵⁰ Although no action was taken on them, they were studied by the ABA. ⁵¹ Significantly, while commenting that the  [*255]  "time tested machinery of the antitrust law contains several useful and workable features," the ABA suggested that the underlying theory of the antitrust law -- the maintenance of competition -- might make the direct use of the antitrust laws maladapted to the goal of curtailing organized crime's influence in the upperworld. The ABA expressed particular concern that antitrust concepts like "standing" and "proximate cause" -- "appropriate in a purely antitrust context" -- would create "inappropriate and unnecessary obstacles" in the way of persons injured seeking "treble damage recovery." ⁵² Accordingly,  [*256]  the ABA recommended that the Hruska and Poff bills be redrafted outside of the antitrust context to avoid the impact of restrictive antitrust precedent. ⁵³

C. The Introduction of the Organized Crime Control Act

On January 15, 1969, Senator John L. McClellan introduced S. 30, the Organized Crime Control Act. The Act was drafted to implement a number of the recommendations of the Katzenbach Commission, although it did not at that time contain a RICO-type title. ⁵⁴ On March 11, 1969, Senator McClellan made a major speech on the floor of the Senate, in which he reviewed the development of organized crime in the United States, including its structure and its activities in gambling, narcotics, loansharking, the infiltration of businesses, the takeover of unions, and the subversion of democratic processes. ⁵⁵ In addition, Senator McClellan addressed the failure of traditional laws and law enforcement procedures to arrest its growth, and he analyzed the various provisions of S. 30 that were designed to change those laws and procedures. Noting the specific businesses infiltrated, Senator McClellan had this to say about that infiltration:

Usually, after [the] takeover [of a business] . . . defaulted loans are liquidated by professional arsonists burning the business and then collecting the insurance or by various bankruptcy fraud techniques, which are called "scam." . . . Often, however, the organization, using force and fear, will attempt to secure a monopoly in the service or product of the business. When the campaign is successful, the organization begins to extract a premium price from customers. Purchases by infiltrated businesses are always made from specified allied firms. With its extensive infiltration of legitimate business,  [*257]  organized crime thus poses a new threat to the American economic system. The proper functioning of a free economy requires that economic decisions be made by persons free to exercise their own judgment. Force or fear limits choice, ultimately reduces quality, and increases prices. When organized crime moves into a business, it usually brings to that venture all the techniques of violence and intimidation which it used in its illegal businesses. Competitors can be effectively eliminated and customers can be effectively confined to sponsored suppliers. The result is more unwholesome than other monopolies because the newly dominated concern's position does not rest on economic superiority. ⁵⁶

Senator McClellan had this to say about the infiltration of unions:

Closely paralleling its takeover of legitimate businesses, organized crime has moved into legitimate unions. Control of labor supply through control of unions can prevent the unionization of some industries or can guarantee sweetheart contracts in others. It provides the opportunity for theft from union funds, extortion through the threat of economic pressure, and the profit to be gained from the manipulation of welfare and pension funds and insurance contracts. Trucking, construction, and waterfront entrepreneurs have been persuaded for labor peace to countenance gambling, loan-sharking and pilferage. All of this, of course, makes a mockery of much of the promise of the social legislation of the last half century. ⁵⁷

Senator McClellan had this to say about the subversion of democratic processes:

To exist and to increase its profits, . . . organized crime has found it necessary to corrupt the institutions of our democratic processes, something no society can long tolerate. Today's corruption is less visible, more subtle and therefore more difficult to detect and assess than the corruption of the prohibition and earlier eras. Organized  [*258]  crime operates even in the face of honest law enforcement, but it flourishes best in a climate of corruption. As the scope of organized crime's activities has expanded, its efforts to corrupt public officials at every level of government have grown. For with the necessary expansion of governmental regulation of private and business activity, its power to corrupt has given organized crime greater control over matters affecting the everyday life of each citizen. The potential for harm today is thus greater if only because the scope of governmental activity is greater. ⁵⁸

D. The Introduction of S. 1623

On March 20, 1969, Senator Hruska introduced S. 1623, the Criminal Activities Profits Act. ⁵⁹ Senator Hruska noted Senator McClellan's  [*259]  March 11th speech, commenting that he "need not reiterate  [*260]  everything that the distinguished senator from Arkansas . . . set  [*261]  forth." ⁶⁰ He did, however, want to "focus" ⁶¹ on the senator's point about the infiltration of the legitimate economy. ⁶² Senator Hruska then indicated that S. 1622 had been drafted to "synthesize" the earlier legislation on which he and Congressman Poff had worked and on which the ABA had favorably commented. ⁶³ The bill, he said, ⁶⁴ attacked "the economic power" of organized crime "on two fronts -- criminal and civil," but that the "criminal provision . . . [was] intended primarily as an adjunct to the civil provision," which he "consider[ed] . . . the more important feature" of the bill. ⁶⁵ As introduced, S. 1623 in fact included express provisions for private equitable relief and treble damages. ⁶⁶

 [*262]  E. The Introduction of S. 1861

On April 18, 1969, Senators McClellan and Hruska introduced S. 1861, the Corrupt Organizations Act. ⁶⁷ Senator McClelland indicated that it was "in part a product of the testimony developed in four days of hearings on S. 30." ⁶⁸ He also indicated that Congressman Poff had "been in contact with . . . [him] in reference to [the] bill." ⁶⁹ As introduced, S. 1861 did not, however, expressly include provisions for private equitable relief or treble damages. ⁷⁰ Its provisions only provided expressly for criminal sanctions and equitable relief sought in government suits. ⁷¹ Senator McClellan noted that S.  [*263]  1861 drew "heavily upon the remedies developed in the field of antitrust," but he added that as sponsor of the bill he had "no intention . . . of importing the great complexity of antitrust law enforcement into" the enforcement of S. 1861. ⁷² Nor did he intend to "limit the remedies available to those which have already been established." ⁷³ He wanted, he said, to retain the "ability of our chancery courts to formulate a remedy to fit the wrong." ⁷⁴ In addition, Senator McClellan expressed his hope that "provisions [of S. 1861] might well be incorporated by way of an amendment into S. 30 itself." ⁷⁵

 [*264]  The Department of Justice commented on S. 1861 on August 11, 1969. ⁷⁶ A central concern of the Department was the breadth of predicate offenses. ⁷⁷ It suggested that they were "too broad and would result in a large number of unintended applications, as well as tending toward a complete federalization of criminal justice." ⁷⁸ A  [*265]  more circumscribed definition of the predicate offenses was suggested, which would be narrower, but still "broad enough to include most state statutes customarily invoked against organized crime," ⁷⁹ a suggestion that was, at least in part, adopted by the Committee. ⁸⁰

F. The Reporting of the Organized Crime Control Act In the Senate

On December 18, 1969, Senator McClellan reported for the Judiciary Committee S. 30, the Organized Crime Control Act, amended to incorporate S. 1861 as Title IX. ⁸¹ The Committee Report described Title IX in language that paralleled the Senator's March 11th speech, giving special attention to the infiltration of businesses and the taking over of unions. ⁸² The report noted, for example, that the stock exchange had been subjected to thefts, businesses  [*266]  had been liquidated by arsonists to collect insurance, bankruptcy fraud techniques had been employed, premium prices had been extracted from customers, and competitors had been eliminated. ⁸³ Unions, the report continued, had been victimized by theft and used to extort, while profit had been gained by the manipulations of welfare and pension funds and insurance contracts. ⁸⁴ Present laws were termed "inadequate to remove criminal influences from legitimate endeavors." ⁸⁵ The Committee Report called for "[n]ew approaches that . . . [dealt] not only with individuals, but also with the economic base through which those individuals constitute[d] a serious threat to the economic well-being of the Nation," ⁸⁶ including "a civil law approach of equitable relief broad enough to do all that is necessary to free the channels of commerce from all illicit activity." ⁸⁷ While "it is necessary," the Report noted, "to free the channels of commerce from predatory activities, . . . there [was] no intent to visit punishment on any individual: the purpose [was] civil. Punishment as such [was] limited to the criminal remedies. . . ." ⁸⁸ Title  [*267]  IX, "it [was] . . . emphasized, [was] remedial rather than penal." ⁸⁹

 [*268]  The text of S. 30 as reported expanded its statement of findings and purpose, a blend of S. 30 and S. 1861, to note, inter alia, "fraud" as one of the activities of "organized crime"; ⁹⁰ the original findings of S. 1861 had included "harm[ing] innocent investors and competing organizations" without relating the harm to "fraud." ⁹¹ In addition, the list of "racketeering activities" in Title IX was narrowed as the Department of Justice suggested, but it was also expanded to include mail fraud (18 U.S.C. § 1341), wire fraud (18 U.S.C. § 1343) and securities fraud. These fraud offenses complemented bankruptcy fraud, which was in S. 1623, and theft from interstate shipments (18 U.S.C. § 659) and transportation of property taken by theft or fraud (18 U.S.C. §§ 2314-2315), which were in S. 1861. Offenses relating to union corruption included embezzlement (18 U.S.C. § 664; 29 U.S.C. § 501(c)), corrupt welfare fund payments (18 U.S.C. § 1954), and the Taft-Hartley Act (29 U.S.C. § 186). Government corruption was attacked, inter alia, by the state offenses ⁹² of bribery and extortion and the federal offenses, not only of fraud, but also of bribery (18 U.S.C. § 201), obstruction of justice (18 U.S.C. § 1510), and extortion (18 U.S.C. § 1951). ⁹³ While the Judiciary Committee favorably  [*269]  reported S. 30, Senators Philip A. Hart and Edward M. Kennedy  [*270]  filed individual views expressing concern that "the reach of [the] . . . bill . . . [went] beyond organized criminal activity." ⁹⁴ Reflecting the view of the American Civil Liberties Union, they thought that if it were amended "to restrict its scope solely to organized criminal activity," it would contribute "important and useful means of eradicating organized crime." ⁹⁵

G. Senate Debate on the Organized Crime Control Act

On January 20, 1970, Senator McClellan called up S. 30, as reported. ⁹⁶ Noting that the bill "incorporated," inter alia, the recommendations of the ABA, he reviewed for the Senate, as he had done on March 11, the scope and impact of organized crime in the United States ⁹⁷ and discussed the various titles of the bill, concentrating on Title IX, now entitled "Racketeer Influenced and Corrupt Organizations (RICO)," on the infiltration of businesses and unions, and specifically noting such activities as bankruptcy fraud, the theft of securities and their fraudulent pledging, and the counterfeiting of hit records. ⁹⁸ The legitimate endeavors in which organized crime had been active were noted; the list included "accounting, banking, charities, construction, insurance, real estate, and stock and bonds." ⁹⁹ Senator  [*271]  Hruska also spoke on the importance of Title IX, calling it "rather novel" and "a most promising and ingenious proposal" ¹⁰⁰ and repeating that its "principal value . . . may well be found to exist in its civil provisions." ¹⁰¹ Senator Robert C. Byrd, too, spoke in favor of Title IX, noting how "arson" had been used by organized crime to put pressure on the A & P to purchase mob-manufactured detergent. ¹⁰² S. 30 was passed by the Senate, almost unanimously, on January 23, 1970. ¹⁰³

H. House Consideration of the Organized Crime Control Act

In the House, S. 30 was referred to the Committee on the Judiciary on January 26, 1970. ¹⁰⁴ On March 10, 1970, Congressman Poff ¹⁰⁵ took the House floor to comment on it, and in particular on Title IX. He brought to the attention of the floor a "thoughtful and accurate" analysis of S. 30 prepared by the United States Chamber of Commerce, which included "several specific hypothetical examples, which aid[ed] the reader in understanding concretely the provisions of S. 30." ¹⁰⁶ The Chamber of Commerce report included a  [*272]  detailed analysis of how the Senate bill would operate to attack a Mafia boss's takeover of a juke box corporation. ¹⁰⁷ Congressman Poff also inserted in the House hearings a copy of the ABA Report. ¹⁰⁸

The House hearings began on May 20, 1970. The Association of the Bar of the City of New York appeared on June 10, 1970, represented by Sheldon H. Elsen. ¹⁰⁹ The Association's written statement suggested that Title IX went much too far, ¹¹⁰ as its reach extended beyond organized crime. In particular, the Association criticized the scope of "racketeering activity." ¹¹¹ The point was repeated in oral  [*273]  testimony. ¹¹² It provoked a detailed response from Senator McClellan on the Senate floor, the thrust of which was that the statute may well have been drafted in response to organized crime, but that as a legislature, Congress had a duty to enact comprehensive programs that need not be so circumscribed. Accordingly, it was not a valid objection to point out that the bill's scope was not limited to the problem that gave rise to it. In addition, he made a telling rejoinder to the ACLU's complaints about the scope of the bill beyond organized crime. There ought not be, he said, a double standard of civil liberties. Organized crime members, too, had rights, and if the bill was not objectionable as applied to them, it was not objectionable applied beyond them. ¹¹³

 [*274]  While S. 30 was pending in the House, the ABA formally endorsed  [*275]  it on July 15, 1970, although several amendments, including a private treble damage action, were suggested. Senator McClellan commented on the endorsement on the Senate floor, noting that the ABA's suggestion for the addition of treble damage relief was a "constructive contribution," ¹¹⁴ On July 23, 1970, Edward L. Wright, the President-elect of the ABA, testified before the House on S. 30, and presented to it the suggestion for the treble damage action amendment. ¹¹⁵

On September 30, 1970, S. 30 was favorably reported from the House Judiciary Committee. ¹¹⁶ When the bill was brought up for  [*276]  consideration, Judiciary Committee Chairman Emanuel Celler --without expressing any words of limitation -- described Title IX as, inter alia, authorizing "treble damage suits on the part of private parties who are injured." ¹¹⁷ During the debate, however, Congressman Abner J. Mikva, an opponent of the bill, objected, as he had in the Committee Report, to the reach of S. 30 beyond organized crime: "I ask my colleague from Virginia (Mr. Poff) this rhetorical question: where in the bill does one find a definition of organized crime?" ¹¹⁸ Congressman Poff responded that there was none, but that Congressman Mikva himself would probably have been among the first to object if the bill had been status-based legislation. ¹¹⁹ In addition,  [*277]  Congressman Mikva objected to the scope of "racketeering activity" on the ground of federalism, but his plea to narrow the scope of Title IX came to no avail. ¹²⁰

 [*278]  On October 7, 1970, the House returned to S. 30. Congressman Poff, as had Congressman Celler, used no words of limitation in outlining the broad equitable powers given the courts by Title IX and the scope of the new treble damage relief. ¹²¹ Debate, however, again  [*279]  focused on "organized crime." Congressman Mario Biaggi offered an amendment that would have explicitly prohibited membership in the Mafia. ¹²² Congressman Poff argued against it on constitutional grounds, ¹²³ noting in language virtually identical to Senator McClellan's ¹²⁴ that there was no need to try to confine S. 30 to "organized crime," as it might properly be applied to others as well. Eventually, the House passed the bill by a vote of 431 to 26. ¹²⁵

I. Senate Consideration of the House-Amended Bill

The Senate took up the House-amended bill on October 12,  [*280]  1970. ¹²⁶ Senator McClellan regarded most of the House amendments as largely minor changes or of "clarifying and strengthening" ¹²⁷ effect. He suggested that a conference was not necessary. Senator Hruska, too, noted that the House changes "were not of major significance," and he agreed that a conference was not required. The Senate agreed to the motion to accept the House amendments by a voice vote. ¹²⁸

The President signed the legislation on October 15, 1970. ¹²⁹

J. Analysis of Legislative History

This review of the legislative history of S. 30 in general, and Title IX in particular, establishes the following points beyond serious question:

(1) Congress fully intended, after specific debate, to have RICO apply beyond any limiting concept like "organized crime" or "racketeering";

(2) Congress deliberately redrafted RICO outside of the antitrust statutes, so that it would not be limited by antitrust concepts like "competitive," "commercial," or "direct or indirect" injury;

(3) Both immediate victims of racketeering activity and competing organizations were contemplated as civil plaintiffs for injunction, damage, and other relief;

(4) Over specific objections raising issues of federal-state relations and crowded court dockets, Congress deliberately extended RICO to the general field of commercial and other fraud; and

(5) Congress was well aware that it was creating important new federal criminal and civil remedies in a field traditionally occupied by common law fraud.

Accordingly, neither the text nor the legislative history of RICO stood in the way of recovery by the plaintiffs in Bennett. It is appropriate, therefore, to turn to the jurisprudence under the statute.

V. The Jurisprudence Under RICO

Only a handful of civil actions have been brought under RICO. As such, its jurisprudence could hardly be said to have been authoritatively  [*281]  determined before Bennett. Several actions had in fact been dismissed on a variety of grounds, including a failure to allege an "organized crime" or a "racketeering" connection, ¹³⁰ the failure to allege a predicate offense, ¹³¹ the novel character of the theory of the violation of the predicate offense alleged, ¹³² the failure to allege a "pattern" of racketeering activity, ¹³³ the failure to allege a "competitive" or "racketeering enterprise" injury, ¹³⁴ and the failure to distinguish  [*282]  in the complaint between the "person" and the "enterprise." ¹³⁵ On the other hand, a majority of civil cases under RICO had either expressly ¹³⁶ or impliedly ¹³⁷ rejected a number of these contentions or  [*283]  were easily distinguishable. ¹³⁸ The court in Bennett, therefore, wrote on a relatively clean slate, where it was free to reason on the merits and not unduly bound by precedent. ¹³⁹  [*284]  VI. The Opinion in Bennett v. Berg

A. The Question of Organized Crime

The court in Bennett did not devote much time to the challenge to the complaint on the ground that no allegation had been made of a connection between organized crime and the defendants. Writing for the court, Judge Henley noted that the contention had "some degree of support" from courts "swayed by Congress's evident concern with organized crime in the passage of RICO." ¹⁴⁰ Nevertheless, the court was, Judge Henley wrote, "convinced that the better reasoned approach" rejected any attempt "to interpret RICO as creating a status offense." ¹⁴¹ The court relied on the legislative history of  [*285]  the statute, the opinions of its sister circuits in the criminal area, the majority trend in lower court opinions in the civil area, and the unanimous opinion of the commentators. Recognizing that its conclusion might, however, "tend to extend the net of the RICO Act to situations which otherwise might find a remedy only in the state courts," the court noted that "some federalization of state claims was not unanticipated by Congress." ¹⁴² As such, under the prevailing jurisprudence of the Supreme Court, Judge Henley observed, the court lacked "authority to restrict the reach of the statute." ¹⁴³ Nor did the court see an opening of "the flood gates for federal adjudication of every common law fraud claim," for RICO claims had to involve "an enterprise which engages in or affects interstate commerce." ¹⁴⁴

The court spent little time with the organized crime challenge. Similarly, little comment is warranted on its reasoning. No serious exception can be -- or ought to be -- raised to it. Indeed, it is difficult to see how the challenge could have been taken so seriously by the lower courts, not only in light of the text of the statute itself, but also its explicit legislative history. The blunt truth is that some lower courts have been more intent on redrafting than reading RICO. ¹⁴⁵

 [*286]  B. The Question of Culpable "Person" Separate From the Charged "Enterprise"

Although here, too, the court devoted little time to the issue, the distinct person-enterprise challenge presented a far more complex question. Count I of the complaint sought treble damage relief from all defendants, except John Knox Village, leaving the Village in the role of the "enterprise" operated by the other defendants' allegedly illegal acts. Count II of the complaint, however, sought equitable relief from the Village, so it cast the Village in the role of "person." The court thought this made the "residential community" -- viewed as an association in fact -- the "enterprise." Prudential argued, therefore, that no "enterprise . . . [had been] alleged apart from the 'person' who 'associated with' an enterprise for purpose of racketeering." ¹⁴⁶ Because the complaint had not "clearly set forth" its theories in separate counts, shifting the role of the Village from Count I (person) to Count II (enterprise), the court held that the RICO claim against the Village in Count II could not stand. ¹⁴⁷ Nevertheless,  [*287]  the court suggested that on remand the plaintiffs be permitted to amend their complaint so that "justice" might be done and a decision reached on the merits, not merely the pleadings.

To be sure, the text of RICO requires the showing of two separate elements: "person" and "enterprise." But nothing in the statute  [*288]  compels the conclusion that the elements are mutually exclusive. ¹⁴⁸ Nothing on the face of the statute, on the other hand, compels the conclusion that they are not mutually exclusive. Either reading of the statute would be consistent with its unadorned text. The resolution of the issue, however, ought to turn on which statutory construction is most consistent with Congress' expressed purpose to provide "enhanced sanctions and new remedies." ¹⁴⁹ Obviously, too, Congress' characterization of RICO as "remedial" and its directive that RICO be "liberally construed" to implement that characterization ought to be brought into play. ¹⁵⁰ Following that approach, the proper result  [*289]  should depend on the particular relationship between the "person,"  [*290]  "enterprise," and "pattern of racketeering activity" that is involved in the violation of each of RICO's basic standards. In some situations, no objection ought to be raised to attributing to the "enterprise" civil liability or criminal responsibility for the conduct of the "person." In other situations, such an attribution would be perverse.

"Person" may, or course, include "any individual or entity capable of holding a legal or beneficial interest in property." ¹⁵¹ The concept  [*291]  of "enterprise" may be divided into four broad categories: (1)  [*298]  commercial entities (e.g. corporations, ¹⁵² partnerships, ¹⁵³ sole proprietorships); ¹⁵⁴ (2) benevolent organizations (e.g. unions, ¹⁵⁵ benefit funds, ¹⁵⁶ schools ¹⁵⁷ ); (3) governmental units (e.g. the office of a governor, ¹⁵⁸  [*299]  a state legislator, ¹⁵⁹ a court, ¹⁶⁰ a prosecutor's office, ¹⁶¹ a police ¹⁶² or sheriff's ¹⁶³ department, or an executive department or agency ¹⁶⁴ ); or (4) associations in fact (licit or illicit). ¹⁶⁵ The categories  [*300]  are not mutually exclusive. ¹⁶⁶

"Patterns of racketeering activity" ¹⁶⁷ may also be grouped into four broad, but not mutually exclusive categories: (1) violence; ¹⁶⁸ (2)  [*303]  provision of illegal goods and services; ¹⁶⁹ (3) corruption in the labor  [*305]  movement ¹⁷⁰ or among public officials; ¹⁷¹ and (4) commercial and  [*306]  other forms of fraud. ¹⁷² Since RICO's standards make "unlawful"  [*307]  certain investments, acquisitions or conduct in connection with an "enterprises," the roles that the enterprise may play in a violation of these standards may be variously -- but not mutually exclusively -- described as "prize," "instrument," "victim," or "perpetrator." ¹⁷³

A violation involving an unlawful investment will usually cast the enterprise in the role of a "prize." ¹⁷⁴ Typically, a violation involving  [*308]  an unlawful acquisition will find the enterprise in the role of "prize" or "victim." ¹⁷⁵ Violations involving the operation of an enterprise  [*309]  by a pattern of racketeering activity may find the enterprise in the role of an "instrument," ¹⁷⁶ "victim," ¹⁷⁷ or "perpetrator." ¹⁷⁸ Where an enterprise is a "prize" or "victim," no salutory remedial purpose would be served by attributing the conduct of an individual involved in the pattern of racketeering activity to the individual or entity playing the role of the enterprise, whether for civil liability or criminal responsibility. Indeed, doing so would undermine the purpose of the Act. ¹⁷⁹ On the other hand, the remedial purpose of the statute would be enhanced by such an attribution where the individual or entity was playing the role of "perpetrator." Vicarious and entity civil liability and criminal responsibility are well-established principles in federal jurisprudence; they should also serve well in implementing RICO's broad remedial purposes. ¹⁸⁰

A more difficult issue, however, is presented by the role of "instrument." The enterprise is used in the unlawful conduct, but it is not its author in the same sense as it is when the enterprise is the "perpetrator." Nonetheless, it is not wholly innocent, as when it plays the role of purely a "prize" or "victim." The crucial issue comes down to determining the general impact of vicarious or entity  [*324]  liability in controlling the unlawful conduct. Should the risks of loss be shifted for civil liability? Would a broadening of the onus of criminal responsibility tend to alter the conduct of other individuals or those who are in charge of the entity, so that the unlawful conduct itself would be curtailed? On balance, the remedial purposes of RICO tip the judgment toward finding civil liability, but not criminal responsibility for the enterprise when its role is purely that of "instrument." ¹⁸¹ Indeed, once it is recognized that substantial policy  [*325]  justifications in certain cases support treating the "enterprise" as a "person" and that the result, in any event, may be achieved by artful pleading (as the Bennett court noted), requiring the plaintiff to plead a "person" separate from the "enterprise" can be seen to be artificial. Accordingly, the court of appeals wrongly decided in Bennett that a single RICO count may not treat an "enterprise" as both an "enterprise" and a "person."

C. The Question of an "Enterprise" Separate From the Charged "Pattern of Racketeering Activity"

The defendants in Bennett contended that the complaint failed to allege the existence of an "enterprise" distinct from the alleged pattern of "racketeering activity." The district court agreed, noting that the complaint portrayed the enterprise, the John Knox Village, as "pervasively fraudulent." ¹⁸² The court of appeals disagreed, finding that the Village had an existence separate from the fraud alleged, since it provided "numerous legitimate services"; ¹⁸³ it was, moreover, an incorporated body under Missouri law.

The defendant's objection here did little more than echo the  [*326]  now discredited analysis of Sutton, Anderson, and Turkette. ¹⁸⁴ At least where legitimate entities are involved, little difficulty exists in discerning and establishing the elements of "enterprise" and "pattern." The objection therefore represented little more than a shotgun approach that sought to raise all conceivable errors. ¹⁸⁵ Appropriately, it was rejected.

D. The Question of "Pattern"

The defendant next contended that the complaint had failed to allege a "pattern of racketeering activity." In addition, they objected under Rule 9(b) of the Federal Rules of Civil Procedure to the specificity of the allegations of fraud. The court of appeals rejected the first contention out of hand, but it found "some merit" in the second objection. ¹⁸⁶ The court was troubled that matters relating to time, place, and content had been alleged as to only some of the representations and particularized as to only some of the defendants. Nevertheless, while the court struck the offending allegations, the action was taken without prejudice to make proper amendment on remand.

Rule 9(b) requires all averments of fraud or mistake to state the circumstances with particularlity. ¹⁸⁷ The rule is rooted in a concededly valid desire to protect defendants from lightly made claims, often advanced only for their settlement value as part of "strike"  [*327]  suits. ¹⁸⁸ Nevertheless, the rule does not abrogate Rule 8, ¹⁸⁹ and the two must be harmonized. ¹⁹⁰ Ultimately, Rule 9(b)'s aim is to provide "adequate notice of plaintiff's claim of fraud." ¹⁹¹ Circumstances usually include such matters as the time, place, and content of false representations, the identity of the speaker, and what was lost. ¹⁹² In the context of the general jurisprudence of Rule 9, the court of appeals' decision was, therefore, wholly proper. ¹⁹³

E. The Question of "Investment," "Acquisition," or "Conduct"

The defendants also argued that the plaintiffs had failed to allege that they had "invested" racketeering proceeds in an enterprise,  [*328]  "acquired an interest in" an enterprise through a pattern of racketeering activity, or "associated with" an enterprise in the conduct of its affairs through a pattern of racketeering activity. The court of appeals treated only the allegation of "association with," noting that it was the plaintiff's "strongest claim." ¹⁹⁴ The court had no difficulty, however, in finding that the "multiple incidents" of mail and wire fraud and the "numerous allegations of particular false statements" ¹⁹⁵ constituted conduct falling within the proscription of Section 1962(c). ¹⁹⁶

Here, too, the defendant's challenge to the language of the complaint was little more than another effort to touch all bases in resisting the plaintiff's suit. It was clearly without merit, and it deserved the cursory treatment it received.

F. The Question of Cognizable Inquiry

The defendants also contended that the plaintiffs "failed to allege the kind of injury which supports standing to bring a civil RICO suit." ¹⁹⁷ The plaintiffs had alleged several forms of monetary loss, including depreciated entrance endowment payments and higher monthly service charges. Defendants responded by arguing that such injury was not "injury to property" within section 1964(c), ¹⁹⁸ which  [*329]  was, they suggested, limited to injury to "competitive or commercial interests." ¹⁹⁹

The court of appeals termed the argument "troublesome," ²⁰⁰ and it noted that it had found favor with "some courts." ²⁰¹ Nevertheless,  [*330]  it held that "commercial or competitive injury" [was] not required by . . . RICO." ²⁰² To be sure, RICO was "intended . . . to combat the threat posed by racketeer influence in the free market system, [but] . . . Congress did not see the objectives of RICO and the antitrust laws as coterminous." ²⁰³ The court noted that "[d]ifferent policies under[lay] the two bodies of law." ²⁰⁴

The court of appeal's opinion is a refreshing model of clarity of expression and insight on this issue. It was precisely the possibility of the argument advanced by the defendants that led Congress to draft RICO outside of the antitrust statutes. ²⁰⁵ That defendants would make such a specious argument is understandable. That district courts would be persuaded by it is lamentable. ²⁰⁶ Appropriately, the court of appeals rejected the defendants' contentions.

G. The Question of Equitable Relief Not Available to Private Plaintiffs

Finally, the defendants argued that the equitable relief requested by the plaintiffs was not available to "private plaintiffs." ²⁰⁷ In  [*331]  addition to treble damage relief, the plaintiffs had sought to have the Village reorganized under section 1964(a). ²⁰⁸ The court of appeals, however, declined to "reach the difficult question whether . . . this equitable relief [was] available to private plaintiffs pursuant to 18 U.S.C. § 1964 and, if not, whether such relief may be granted under the court's general equitable powers." ²⁰⁹ The court added, without "endorsing or rejecting the opinions there expressed," that such scholarship as the court had discovered had concluded that "equitable relief [was] available to the private plaintiff." ²¹⁰

It is, of course, wholly understandable that the court of appeals was reluctant to essay the scope of the district court's equity powers in the absence of a full record. Mr. Justice Cardozo put it well: "The plastic remedies of the chancery are moulded to the needs of justice, [b]ut . . . facts . . . are the coin which . . . [a court] must have in [its] . . . pocket if . . . [it is] to pay [its] way with legal tender. Until [it is] provided with a plentiful supply . . . [it would] do better to stay at home. . . ." ²¹¹ Nevertheless, scholarship is not so circumscribed. Comment may be usefully offered on the issue.

It is difficult to see how a court could conclude that RICO does not provide equitable relief for private parties. Section 1964(a) is a general grant of equitable power. It is not limited on its face or in its legislative history. Section 1964(b) grants the government authority to seek relief, an authority that it was necessary to set out lest old learning be used to circumscribe the new governmental power to seek equitable relief. ²¹² Nothing in section 1964(b) speaks in negative terms about an authorization for private parties to seek similar relief. Indeed,  [*332]  the governmental suits are to be brought on behalf of private parties. No satisfactory explanation can be offered as to why Congress would have precluded victims from seeking help themselves. Section 1964(c), moreover, says "sue and" and not "sue to." The contrary argument would have to suggest that by adding the right to secure treble damage relief to the general right to sue Congress somehow manifested an intention to subtract the right to obtain other forms of relief. How addition might be converted into subtraction in a remedial statute that must be liberally construed strains even the legal imagination. Section 1964 ought to be read as authorizing both governmental and private suits to obtain equitable relief. To the degree that any ambiguity might be thought to exist in the choice of language, the liberal construction clause and the remedial purpose of the statute come down on the side of finding private suits to be authorized and that full relief can be granted. No satisfactory rationale can be offered, in short, to explain why a court ought to feel itself circumscribed in doing full justice for a victim under RICO.

To be sure, arguments can be made to the contrary. The remedial purpose of the statute and its liberal construction clause can be ignored. Section 1964(b) can be read to carry with it a negative implication by inserting an "only" in its text. In addition, the "and" in section 1964(c) can be read to mean "to." As so interpreted, RICO would then authorize governmental suits for equitable relief, but private suits would be limited to the recovery of treble damages. Yet it takes but a brief examination of the consequences of this illiberal rewriting of section 1964 to realize that it could not be what Congress intended. Equity's hand would, in fact, be tied down in only one situation. Where damage was threatened but not yet suffered, RICO would not afford the private plaintiffs equitable relief. But where damage was sustained, the jurisdiction conferred on the court to grant treble damage relief would carry with it the power, under well-established principles of pendent jurisdiction, to grant equitable relief for the common law causes of action that would unquestionably also exist under state law. ²¹³ Subject to general limitations on federal  [*333]  jurisdiction, ²¹⁴ the relief would be complete. ²¹⁵ Nevertheless, the terms and conditions under which justice might be done would be  [*334]  dependent, not upon the special jurisprudence of RICO, but the general federal jurisprudence of remedies and the elements of the state causes of action. ²¹⁶

While the relief granted could in fact be complete, that difference might be determinative of the outcome in many situations where the issue in question involved providing provisional relief, fashioning temporary restraining orders, or granting temporary injunctions, ²¹⁷ as well as affording ultimate relief of an equitable character. ²¹⁸ Such  [*340]  a circumscribed interpretation of the statute would, of  [*341]  course, introduce great uncertainty to RICO litigation, ²¹⁹ create questions of law exam complexity, ²²⁰ promote forum shopping under RICO's comprehensive jurisdiction, venue, and process provisions, ²²¹ and produce a wholly unjustifiable lack of uniformity in the practical impact of a major federal statute on both plaintiffs and defendants. Nothing about the prospect, in short, commends itself to the thoughtful observer. It cannot be what Congress intended when it crafted RICO. It is to be sincerely hoped that it will not prevail and bring about a need for amendatory legislation.

VII. Conclusion

The court of appeals decision in Bennett must be placed in a larger context. The Supreme Court in United States v. Turkette commented that its decision that the concept of "enterprise" included illicit associations was "neither absurd nor surprising." ²²² Similarly, it is neither absurd nor surprising that Congress decided in 1970 to make commercial and other forms of fraud subject to private civil relief. Nothing that has happened since then undermines that 1970 congressional policy judgment. ²²³

 [*342]  The most comprehensive study of fraud done in recent years was published in 1974 under the auspices of the Chamber of Commerce of the United States. ²²⁴ The Chamber estimated the direct economic cost of fraud as follows:

Billions of Dollars
1.	Bankruptcy Fraud	.08
2.	Bribery, Kickbacks & Payoffs	3.00
3.	Consumer Fraud	21.00
4.	Embezzlement	7.00
5.	Insurance Fraud	2.00
6.	Receiving Stolen Property	3.50
7.	Securities Theft and Frauds	4.00

 [*343]  Along with credit card and check fraud (1.10) and computer related crime (.10), the total figure came to more than 40 billion dollars per year. ²²⁵ That figure, however, omitted fraud against the government. Given the inflation rate since 1974, moreover, it would not be unreasonable to estimate a figure twice that today. ²²⁶ In addition, more detailed studies since 1974 of specialized areas of fraud indicate that the Chamber's figures substantially underestimated the scope of its economic impact. ²²⁷ Recent studies have, for example, focused on  [*344]  fraud against the government. In 1978, the Comptroller General reported that the opportunities for defrauding the government were virtually unlimited. ²²⁸ More than $ 250 billion worth of economic assistance programs then existed, many of which passed through state and local hands and could be the subject of RICO civil suits, if fraud were uncovered. In fact, the Department of Justice estimated a one to ten percent incidence of fraud: 2.5 to 25 billion dollars a year. ²²⁹ Other studies have focused on commodity investment  [*345]  fraud, ²³⁰ a field said to be "vast and growing." ²³¹ It is estimated that $ 200 million is in fact lost through commodity investment fraud each year. ²³² Arson-for-profit has been called the "easiest crime" ²³³ as well as the nation's "fastest-growing" crime. ²³⁴ Its economic and other impact is great. ²³⁵ Accordingly, it takes but a passing familiarity with the developing literature on fraud in our society to come to the firm conclusion that curtailing it is one of the unmet needs of our system of justice, both criminal and civil.

Resources devoted to investigation and prosecution of fraud, moreover, are not impressive. In 1977, the Section on Criminal Justice of the American Bar Association, under a federal grant, conducted a study of those resources. ²³⁶ The Section studied the  [*346]  Securities and Exchange Commission, the Federal Bureau of Investigation, the United States Postal Inspection Service, the Department of Health, Education and Welfare, the Internal Revenue Service, the Antitrust Division of the Department of Justice, various banking agencies, and selected state and local efforts. Its findings were deeply disturbing. The Section found that the "total federal effort against economic crime [was] . . . underfunded, undirected, and un-coordinated and [was] . . . in need of the development of priorities." ²³⁷ In addition, "available resources [were] . . . unequal to the task of combatting economic crime." ²³⁸ The "lack of resources," the Section found, "at the federal and local level [was] . . . a function of insufficient manpower and inadequately trained personnel." ²³⁹ The implications  [*347]  of that study for private enforcement under RICO are obvious.

While analogies to the jurisprudence of section 4 of the Clayton Act are limited in the RICO context, much can be learned from an  [*348]  analysis of the concept of private civil suits under that Act. Keeping the marketplace competitive is not, of course, the same as curtailing violence, inhibiting the consumption of illicit goods and services, or seeking to promote integrity among private fiduciaries or public officials. Nevertheless, what the Supreme Court has said of section 4 may be legitimately observed of RICO. In 1970, Congress authorized private civil remedies under RICO to create "a private enforcement mechanism that would deter violators . . . and . . . provide ample compensation to . . . victims." ²⁴⁰ Such "private . . . litigation is one of the surest weapons for effective enforcement." ²⁴¹ Congress "created the treble-damage remedy . . . precisely for the purpose of encouraging private challenges to . . . violations." ²⁴² Private suits in fact "provide a significant supplement to the limited resources available to the Department of Justice." ²⁴³ Accordingly, no need exists "to burden the private litigant beyond what is specifically set forth" in RICO itself. ²⁴⁴ No court ought to make a "niggardly construction of the statutory language." ²⁴⁵ Congress knew "that existing law, state and federal, was not adequate to address the problem, which was of national dimensions." ²⁴⁶ Efforts to circumscribe  [*349]  RICO in the courts should, therefore, be turned aside. As the court of appeals in Bennett v. Berg has now happily done, other courts should similarly redeem Congress' 1970 promise of new remedies for victims of crime, particularly in the fraud area. ²⁴⁷

FOOTNOTES:
   n1 685 F.2d 1053 (8th Cir. 1982). A rehearing en banc in Bennett was granted on September 17, 1982. Oral argument was held on January 13, 1983.

n2 685 F.2d at 1057.

n3 18 U.S.C. §§ 1961-1968 (1976). Judge Shadur in Parnes v. Heinold Commodities, Inc., 548 F. Supp. 20, 21 n.1 (N.D. Ill. 1982) wondered, "[g]iven . . . [RICO's] very awkward title and the convenient acronym it generated . . . [whether] the person who christened the legislation was a movie buff with a sense of humor . . . [for in] 'Little Caesar,' the first Hollywood gangster movie of the '30s . . ., Edward G. Robinson played the thinly disguised Al Capone leading role -- and was named 'RICO.'" Judge Shadur's question was first raised by Newsweek reporters, Tony Marro and Elaine Shannon, in a story on RICO that appeared in The Legal Times of Washington, Oct. 8, 1979, at 32, col. 1. They reported that G. Robert Blakey, "who had a major role in drafting the statute . . . will neither admit nor deny that the title was [so] constructed." See Blakey & Gettings, Racketeer Influenced and Corrupt Organizations (RICO): Basic Concepts -- Criminal and Civil Remedies, 53 TEMP. L.Q. 1009, 1025 n.91 (1980) [hereinafter cited as Basic Concepts] for an alternative, but not necessarily inconsistent explanation of the development of RICO's title.

The following state statutes are modeled on the federal act: ARIZ. REV. STAT. ANN. § 13-2312 (1978); CAL. PENAL CODE § 186 (West Supp. 1983); COLO. REV. STAT. § 18-17-101 (1981); 1982 CONN. PUB. ACTS 343; FLA. STAT. ANN. § 895.01 (West Supp. 1982); GA. CODE ANN. § 26-3401 (Supp. 1982); HAWAII REV. STAT. § 842-1 (1976); The Narcotics Profit Forfeiture Act, H.B. 2450, State of Ill. (1982); IND. CODE ANN. § 35-45-6-1 (Burns Supp. 1982); N.J. STAT. ANN. 2C:41 (West 1982); N.M. STAT. ANN. § 30-42-1 (Supp. 1978); OR. REV. STAT. § 166-715 (1981); 18 PA. CONS. STAT. § 911 (1978); R.I. GEN. LAWS § 7-15-1 (Supp. 1982); WIS. STAT. ANN. § 946.80 (Supp. 1982). Legislation is under consideration in Louisiana, New York, and Ohio. For newspaper coverage of the use of the state legislation, see Siegel, Arizona Hits Racketeers in Wallet, L.A. Times, May 3, 1982, at 1, col. 1; Granelli, Playing for Keeps With State RICO, The National Law Journal, July 5, 1982, at 1, col. 4.

n4 685 F.2d at 1057. For purposes of analysis, the order of the defendants' appellate arguments has been altered.

n5 The courts of appeals for the Second, Sixth, and Seventh Circuits have also faced civil RICO appeals. In Cullen v. Margiotta, 618 F.2d 226 (2d Cir. 1980), the court of appeals dismissed an appeal of the dismissal of a civil RICO suit for the failure to allege a sufficient connection to interstate commerce, holding that certifying the orders under Rule 54(b) of the Federal Rules of Civil Procedure as final was an abuse of discretion. See United States v. Margiotta, 688 F.2d 108 (2d Cir. 1982)(mail fraud and extortion conviction of political leader of Nassau County, N.Y., upheld). In Grayson v. Wooden, No. 80-5460 (6th Cir. Feb. 10, 1982), the court of appeals affirmed the granting of a motion for summary judgment and the dismissal of a civil RICO suit, since the plaintiff did not allege two acts of racketeering. In Cenco Inc. v. Seidman & Seidman, 686 F.2d 449 (7th Cir.), cert. denied, 103 S. Ct. 177 (1982), the court of appeals affirmed the dismissal of a civil RICO counterclaim, since only "indirect injury" was alleged. In USACO Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94 (6th Cir. 1982), the court of appeals upheld the issuance of an injunction to preserve the status quo pendente lite in a civil RICO suit. Neither Cullen nor Grayson merits further comment. Cenco Inc. is discussed at text accompanying note 139 infra; USACO Coal Co. is discussed at note 217 infra.

n6 The facts are taken from the opinion of the court of appeals, except where supplemented, as noted, from the pleadings or papers. Since the appeal was heard on the pleadings, the facts alleged in the pleadings were accepted as true. 685 F.2d at 1056 n.4 ("accept . . . factual allegations as true"), 1057-58 ("A complaint must be viewed in the light most favorable to plaintiff"). In addition, the court followed the "accepted rule that a complaint states a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); 685 F.2d at 1057. See McLain v. Real Estate Bd., 444 U.S. 232, 246 (1980). The pleadings, too, were construed to do "substantial justice" under FED. R. CIV. P. 8(f). 685 F.2d at 1058.

n7 Brief for Plaintiff-Appellant at 5, Bennett v. Berg, 685 F.2d 1053 (8th cir. 1982).

n8 Complaint para. 1(a).

n9 685 F.2d at 1056.

n10 Complaint para. 1(c)(1).

n11 Complaint para. 41.

n12 685 F.2d at 1057.