Steven Nelson v. James Nelson
2016 U.S. App. LEXIS 15164
| 8th Cir. | 2016Background
- Steven and James Nelson were equal partners in J&S Nelson Farms, with James controlling the partnership’s finances; Steven largely trusted James and did not monitor finances.
- James allegedly diverted partnership funds for personal use and for other family businesses from 1998 onward, disguising withdrawals as business expenses.
- AgCountry employees Chris Feller (accountant) and Randy Skjerven (banker) are alleged to have assisted: Feller by manipulating bookkeeping and tax returns; Skjerven by wiring funds and arranging loans.
- Steven sued James, Feller, Skjerven, and AgCountry under RICO § 1964(c), alleging a RICO “enterprise” that operated through a pattern of racketeering (mail/wire fraud, tax evasion, bank fraud, forgery, money laundering).
- The district court dismissed under Rule 12(b)(6) for failure to state a RICO claim; the Eighth Circuit affirmed, focusing on Steven’s failure to plead an association-in-fact enterprise.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiff plausibly alleged an association-in-fact "enterprise" under RICO | Nelson: the defendants (James, J&S, Feller, Skjerven, AgCountry affiliates, James’s sons, and related entities) formed a continuing unit functioning for a common purpose to siphon partnership funds | Defendants: alleged acts were discrete services or individual misconduct; no common structure, coordination, or functioning unit tying the parties together | Court: Dismissal affirmed — allegations do not show a distinct, continuing unit or common structure sufficient for an enterprise |
| Whether the alleged misconduct constituted a "pattern of racketeering activity" under § 1962(c) | Nelson: multiple checks, transfers, and electronically-filed tax returns constitute predicate mail/wire fraud acts and together form a pattern | Defendants: predicates either don’t qualify as racketeering or are isolated acts not amounting to a pattern | Court: District court found pattern inadequately pleaded; appellate decision rests on enterprise failure (also noted deficiencies in showing racketeering activity/pattern) |
| Whether employer AgCountry can be held vicariously liable under RICO for employees' acts | Nelson: AgCountry liable under respondeat superior for Feller/Skjerven’s acts | Defendants/AgCountry: contested vicarious RICO liability | Court: Did not decide the question; no need to reach because claims fail on other grounds |
Key Cases Cited
- Boyle v. United States, 556 U.S. 938 (2009) (defines association‑in‑fact enterprise as a continuing unit with common purpose)
- Turkette, 452 U.S. 576 (1981) (enterprise must be an entity separate and apart from the pattern of racketeering)
- Crest Constr. II, Inc. v. Doe, 660 F.3d 346 (8th Cir. 2011) (pleading standards and enterprise/activity distinctions)
- Stephens, Inc. v. Geldermann, Inc., 962 F.2d 808 (8th Cir. 1992) (legitimate separate activities do not necessarily further an enterprise’s common purpose)
- Atlas Pile Driving Co. v. DiCon Financial Co., 886 F.2d 986 (8th Cir. 1989) (example of legitimate businesses forming an ongoing enterprise apart from predicate acts)
- United States v. Henley, 766 F.3d 893 (8th Cir. 2014) (enterprise requires participants to function as a unit)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (2001) (addressed—without deciding—scope of corporate/vicarious RICO liability)