H. J. INC. ET AL. v. NORTHWESTERN BELL TELEPHONE CO. ET AL.
No. 87-1252
Supreme Court of the United States
Argued November 8, 1988-Decided June 26, 1989
492 U.S. 229
Mark Reinhardt argued the cause for petitioners. With him on the briefs were Susan Bedor and John Cochrane.
John D. French argued the cause for respondents. With him on the brief were John F. Beukema, James L. Volling, and Stephen T. Refsell.*
*Briefs of amici curiae urging reversal were filed for the United States by Solicitor General Fried, Acting Assistant Attorney General Richard, Deputy Solicitor General Bryson, Richard G. Taranto, Joel M. Gershowitz, and Frank J. Marine; and for the States of Arizona et al. by Robert K. Corbin, Attorney General of Arizona, John K. Van de Kamp, Attorney General of California, John J. Kelly, Chief State‘s Attorney of Connecticut, Jim Jones, Attorney General of Idaho, Frank J. Kelley, Attorney General of Michigan, W. Cary Edwards, Attorney General of New Jersey, Hal Stratton, Attorney General of New Mexico, Lacy H. Thornburg, Attorney General of North Carolina, and Jean A. Benoy, Senior Deputy Attorney General, Dave Frohnmayer, Attorney General of Oregon, Jim Mattox, Attorney General of Texas, Kenneth O. Eikenberry, Attorney General of Washington, Charlie Brown, Attorney General of West Virginia, Donald J. Hanaway, Attorney General of Wisconsin, and Joseph B. Meyer, Attorney General of Wyoming.
Briefs of amici curiae urging affirmance were filed for the American Federation of Labor and Congress of Industrial Organizations by Robert
Briefs of amici curiae were filed for the Chamber of Commerce of the United States by Stephen A. Bokat, Robin S. Conrad, and Lynn M. Smelkinson; and for Trial Lawyers for Public Justice by Robert M. Hausman.
JUSTICE BRENNAN delivered the opinion of the Court.
The Racketeer Influenced and Corrupt Organizations Act (RICO or Act), Pub. L. 91-452, Title IX, 84 Stat. 941, as amended,
I
RICO renders criminally and civilly liable “any person” who uses or invests income derived “from a pattern of racketeering activity” to acquire an interest in or to operate an enterprise engaged in interstate commerce,
Petitioners, customers of respondent Northwestern Bell Telephone Co., filed this putative class action in 1986 in the District Court for the District of Minnesota. Petitioners alleged violations of
The MPUC is the state body responsible for determining the rates that Northwestern Bell may charge. Petitioners’ five-count complaint alleged that between 1980 and 1986 Northwestern Bell sought to influence members of the MPUC in the performance of their duties-and in fact caused them to approve rates for the company in excess of a fair and reasonable amount-by making cash payments to commissioners, negotiating with them regarding future employment, and paying for parties and meals, for tickets to sporting events and the like, and for airline tickets. Based upon these factual allegations, petitioners alleged in their first count a pendent state-law claim, asserting that Northwestern Bell violated the Minnesota bribery statute,
The District Court granted respondents’ Federal Rule of Civil Procedure 12(b)(6) motion, dismissing the complaint for failure to state a claim upon which relief could be granted. 648 F. Supp. 419 (Minn. 1986). The court found that “[e]ach of the fraudulent acts alleged by [petitioners] was committed in furtherance of a single scheme to influence MPUC commissioners to the detriment of Northwestern Bell‘s ratepayers.” Id., at 425. It held that dismissal was therefore mandated by the Court of Appeals for the Eighth Circuit‘s decision in Superior Oil Co. v. Fulmer, 785 F. 2d 252 (1986), which the District Court interpreted as adopting an “extremely restrictive” test for a pattern of racketeering activity that required proof of “multiple illegal schemes.” 648 F. Supp., at 425.1 The Court of Appeals for the Eighth Circuit affirmed the dismissal of petitioners’ complaint, confirming that under Eighth Circuit precedent “[a] single fraudulent effort or scheme is insufficient” to establish a pattern of racketeer-
II
In Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479 (1985), this Court rejected a restrictive interpretation of
It is, nevertheless, a task we must undertake in order to decide this case. Our guides in the endeavor must be the text of the statute and its legislative history. We find no support in those sources for the proposition, espoused by the Court of Appeals for the Eighth Circuit in this case, that predicate acts of racketeering may form a pattern only when they are part of separate illegal schemes. Nor can we agree with those courts that have suggested that a pattern is established merely by proving two predicate acts, see, e. g., United States v. Jennings, 842 F. 2d 159, 163 (CA6 1988), or with amici in this case who argue that the word “pattern” re-
A
We begin, of course, with RICO‘s text, in which Congress followed a “pattern [of] utilizing terms and concepts of breadth.” Russello v. United States, 464 U. S. 16, 21 (1983). As we remarked in Sedima, supra, at 496, n. 14, the section of the statute headed “definitions,”
Section 1961(5) does indicate that Congress envisioned circumstances in which no more than two predicates would be necessary to establish a pattern of racketeering-otherwise it would have drawn a narrower boundary to RICO liability, requiring proof of a greater number of predicates. But, at the same time, the statement that a pattern “requires at least” two predicates implies “that while two acts are necessary, they may not be sufficient.” Sedima, 473 U. S., at
In addition to
It is reasonable to infer, from this absence of any textual identification of sorts of pattern that would satisfy
The legislative history, which we discussed in Sedima, supra, at 496, n. 14, shows that Congress indeed had a fairly flexible concept of a pattern in mind. A pattern is not formed by “sporadic activity,” S. Rep. No. 91-617, p. 158 (1969), and a person cannot “be subjected to the sanctions of title IX simply for committing two widely separated and isolated criminal offenses,” 116 Cong. Rec. 18940 (1970) (Sen. McClellan). Instead, “[t]he term ‘pattern’ itself requires the showing of a relationship” between the predicates, ibid., and of “the threat of continuing activity,” ibid., quoting S. Rep. No. 91-617, supra, at 158. “It is this factor of continuity plus relationship which combines to produce a pattern.” 116 Cong. Rec., at 18940 (emphasis added). RICO‘s legislative history reveals Congress’ intent that to prove a pattern of racketeering activity a plaintiff or prosecutor must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity.
B
For analytic purposes these two constituents of RICO‘s pattern requirement must be stated separately, though in practice their proof will often overlap. The element of relatedness is the easier to define, for we may take guidance from a provision elsewhere in the Organized Crime Control Act of 1970 (OCCA), Pub. L. 91-452, 84 Stat. 922, of which RICO formed Title IX. OCCA included as Title X the Dangerous Special Offender Sentencing Act,
RICO‘s legislative history tells us, however, that the relatedness of racketeering activities is not alone enough to satisfy
“Continuity” is both a closed- and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition. See Barticheck v. Fidelity Union Bank/First National State, 832 F. 2d 36, 39 (CA3 1987). It
Whether the predicates proved establish a threat of continued racketeering activity depends on the specific facts of each case. Without making any claim to cover the field of possibilities-preferring to deal with this issue in the context of concrete factual situations presented for decision-we offer some examples of how this element might be satisfied. A RICO pattern may surely be established if the related predicates themselves involve a distinct threat of long-term racketeering activity, either implicit or explicit. Suppose a hoodlum were to sell “insurance” to a neighborhood‘s storekeepers to cover them against breakage of their windows, telling his victims he would be reappearing each month to collect the “premium” that would continue their “coverage.” Though the number of related predicates involved may be small and they may occur close together in time, the racketeering acts themselves include a specific threat of repetition extending indefinitely into the future, and thus supply the requisite threat of continuity. In other cases, the threat of continuity may be established by showing that the predicate acts or offenses are part of an ongoing entity‘s regular way of doing business. Thus, the threat of continuity is sufficiently estab-
The limits of the relationship and continuity concepts that combine to define a RICO pattern, and the precise methods by which relatedness and continuity or its threat may be proved, cannot be fixed in advance with such clarity that it will always be apparent whether in a particular case a “pattern of racketeering activity” exists. The development of these concepts must await future cases, absent a decision by Congress to revisit RICO to provide clearer guidance as to the Act‘s intended scope.
III
Various amici urge that RICO‘s pattern element should be interpreted more narrowly than as requiring relationship and continuity in the senses outlined above, so that a defendant‘s racketeering activities form a pattern only if they are characteristic either of organized crime in the traditional sense, or of an organized-crime-type perpetrator, that is, of an association dedicated to the repeated commission of criminal of-
One evident textual problem with the suggestion that predicates form a RICO pattern only if they are indicative of an organized crime perpetrator-in either a traditional or functional sense-is that it would seem to require proof that the racketeering acts were the work of an association or group, rather than of an individual acting alone. RICO‘S language supplies no grounds to believe that Congress meant to impose such a limit on the Act‘s scope. A second indication from the text that Congress intended no organized crime limitation is that no such restriction is explicitly stated. In those titles of OCCA where Congress did intend to limit the new law‘s application to the context of organized crime, it said so. Thus Title V, authorizing the witness protection program, stated that the Attorney General may provide for the security of witnesses “in legal proceedings against any person alleged to have participated in an organized criminal activity.” 84 Stat. 933, note preceding
It is argued, nonetheless, that Congress’ purpose in enacting RICO, as revealed in the Act‘s title, in OCCA‘s preamble, 84 Stat. 923 (Congress seeking “the eradication of organized crime in the United States“), and in the legislative history, was to combat organized crime; and that RICO‘s broad language should be read narrowly so that the Act‘s scope is coextensive with this purpose. We cannot accept this argument for a narrowing construction of the Act‘s expansive terms.
To be sure, Congress focused on, and the examples used in the debates and reports to illustrate the Act‘s operation concern, the predations of mobsters. Organized crime was without a doubt Congress’ major target, as we have recognized elsewhere. See Russello, 464 U. S., at 26; Turkette, 452 U. S., at 591. But the definition of a “pattern of criminal conduct” in Title X of OCCA in terms only of the relationship between criminal acts, see supra, at 240, shows that Con-
Opponents criticized OCCA precisely because it failed to limit the statute‘s reach to organized crime. See, e. g., S. Rep. No. 91-617, at 215 (Sens. Hart and Kennedy complaining that the OCCA bill “goes beyond organized criminal activity“). In response, the statute‘s sponsors made evident that the omission of this limit was no accident, but a reflection of OCCA‘s intended breadth. Senator McClellan was most plain in this respect:
“The danger posed by organized crime-type offenses to our society has, of course, provided the occasion for our examination of the working of our system of criminal justice. But should it follow . . . that any proposals for action stemming from that examination be limited to organized crime?
“[T]his line of analysis . . . is seriously defective in several regards. Initially, it confuses the occasion for reexamining an aspect of our system of criminal justice with the proper scope of any new principle or lesson derived from that reexamination.
“In addition, the objection confuses the role of the Congress with the role of a court. Out of a proper sense of their limited lawmaking function, courts ought to confine their judgments to the facts of the cases before
them. But the Congress in fulfilling its proper legislative role must examine not only individual instances, but whole problems. In that connection, it has a duty not to engage in piecemeal legislation. Whatever the limited occasion for the identification of a problem, the Congress has the duty of enacting a principled solution to the entire problem. Comprehensive solutions to identified problems must be translated into well integrated legislative programs. “The objection, moreover, has practical as well as theoretical defects. Even as to the titles of [the OCCA bill] needed primarily in organized crime cases, there are very real limits on the degree to which such provisions can be strictly confined to organized crime cases. . . . On the other hand, each title . . . which is justified primarily in organized crime prosecutions has been confined to such cases to the maximum degree possible, while preserving the ability to administer the act and its effectiveness as a law enforcement tool.” 116 Cong. Rec. 18913-18914 (1970).
Representative Poff, another sponsor of the legislation, also answered critics who complained that a definition of “organized crime” was needed:
“It is true that there is no organized crime definition in many parts of the bill. This is, in part, because it is probably impossible precisely and definitively to define organized crime. But if it were possible, I ask my friend, would he not be the first to object that in criminal law we establish procedures which would be applicable only to a certain type of defendant?” Id., at 35204.
See also id., at 35344 (Rep. Poff) (“organized crime” simply “a shorthand method of referring to a large and varying group of individual criminal offenses committed in diverse circumstances,” not a precise concept).
The thrust of these explanations seems to us reasonably clear. The occasion for Congress’ action was the perceived need to combat organized crime. But Congress for cogent reasons chose to enact a more general statute, one which, although it had organized crime as its focus, was not limited in application to organized crime. In Title IX, Congress picked out as key to RICO‘s application broad concepts that might fairly indicate an organized crime connection, but that it fully realized do not either individually or together provide anything approaching a perfect fit with “organized crime.” See, e. g., id., at 18940 (Sen. McClellan) (“It is impossible to draw an effective statute which reaches most of the commercial activities of organized crime, yet does not include offenses commonly committed by persons outside organized crime as well“).
It seems, moreover, highly unlikely that Congress would have intended the pattern requirement to be interpreted by reference to a concept that it had itself rejected for inclusion in the text of RICO at least in part because “it is probably impossible precisely and definitively to define.” Id., at 35204 (Rep. Poff). Congress realized that the stereotypical view of organized crime as consisting in a circumscribed set of illegal activities, such as gambling and prostitution-a view expressed in the definition included in the Omnibus Crime Control and Safe Streets Act, and repeated in the OCCA preamble-was no longer satisfactory because criminal activity had expanded into legitimate enterprises. See United States v. Turkette, 452 U. S., at 590-591. Title 18 U. S. C. § 1961(1) (1982 ed., Supp. V), with its very generous definition of “racketeering activity,” acknowledges the breakdown of the traditional conception of organized crime, and responds to a new situation in which persons engaged in long-term criminal activity often operate wholly within legitimate enterprises. Congress drafted RICO broadly enough to encompass a wide range of criminal activity, taking many different forms and likely to attract a broad array of perpetrators
As this Court stressed in Sedima, in rejecting a pinched construction of RICO‘s provision for a private civil action, adopted by a lower court because it perceived that RICO‘s use against non-organized-crime defendants was an “abuse” of the Act, “Congress wanted to reach both ‘legitimate’ and ‘illegitimate’ enterprises.” 473 U. S., at 499. Legitimate businesses “enjoy neither an inherent incapacity for criminal activity nor immunity from its consequences“; and, as a result,
IV
We turn now to the application of our analysis of RICO‘s pattern requirement. Because respondents prevailed on a motion under Federal Rule of Civil Procedure 12(b)(6), we read the facts alleged in the complaint in the light most favorable to petitioners. And we may only affirm the dismissal of the complaint if “it is clear that no relief could be granted
Petitioners’ complaint alleges that at different times over the course of at least a 6-year period the noncommissioner respondents gave five members of the MPUC numerous bribes, in several different forms, with the objective-in which they were allegedly successful-of causing these commissioners to approve unfair and unreasonable rates for Northwestern Bell. RICO defines bribery as a “racketeering activity,”
Under the analysis we have set forth above, and consistent with the allegations in their complaint, petitioners may be able to prove that the multiple predicates alleged constitute “a pattern of racketeering activity,” in that they satisfy the requirements of relationship and continuity. The acts of bribery alleged are said to be related by a common purpose, to influence commissioners in carrying out their duties in order to win approval of unfairly and unreasonably high rates for Northwestern Bell. Furthermore, petitioners claim that the racketeering predicates occurred with some frequency over at least a 6-year period, which may be sufficient to satisfy the continuity requirement. Alternatively, a threat of continuity of racketeering activity might be established at trial by showing that the alleged bribes were a regular way of conducting Northwestern Bell‘s ongoing business, or a regular way of conducting or participating in the conduct of the alleged and ongoing RICO enterprise, the MPUC.
The Court of Appeals thus erred in affirming the District Court‘s dismissal of petitioners’ complaint for failure to plead “a pattern of racketeering activity.” The judgment is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
Four Terms ago, in Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479 (1985), we gave lower courts the following four clues concerning the meaning of the enigmatic term “pattern of racketeering activity” in the Racketeer Influenced and Corrupt Organizations Act (RICO or Act), Pub. L. 91-452, Title IX, 84 Stat. 941, as amended,
Of course it cannot be said that the Court‘s opinion operates only in the direction of letting some obvious racketeers get out of RICO. It also makes it clear that a hitherto dubious category is included, by establishing the rule that the “multiple scheme” test applied by the Court of Appeals here is not only nonexclusive but indeed nonexistent. This is, as far as I can discern, the Court‘s only substantive contribution to our prior guidance-and it is a contribution that makes it more rather than less difficult for a potential defendant to know whether his conduct is covered by RICO. Even if he is only involved in a single scheme, he may still be covered if there is present whatever is needed to establish a “threat of continuity.” The Court gives us a nonexclusive list of three things that do so. Two of those presumably polar examples seem to me extremely difficult to apply-whether “the predicates can be attributed to a defendant operating as part of a long-term association that exists for criminal purposes,” ante, at 243, and whether “the predicates are a regular way of conducting defendant‘s ongoing legitimate business,” ibid. What is included beyond these examples is vaguer still.
It is, however, unfair to be so critical of the Court‘s effort, because I would be unable to provide an interpretation of
That situation is bad enough with respect to any statute, but it is intolerable with respect to RICO. For it is not only true, as JUSTICE MARSHALL commented in Sedima, 473 U. S. 479 (1985), that our interpretation of RICO has “quite simply revolutionize[d] private litigation” and “validate[d] the federalization of broad areas of state common law of frauds,” id., at 501 (dissenting opinion), so that clarity and predictability in RICO‘s civil applications are particularly important; but it is also true that RICO, since it has criminal applications as well, must, even in its civil applications, possess the degree of certainty required for criminal laws, FCC v. American Broadcasting Co., 347 U. S. 284, 296 (1954). No constitutional challenge
However unhelpful its guidance may be, however, I think the Court is correct in saying that nothing in the statute supports the proposition that predicate acts constituting part of a single scheme (or single episode) can never support a cause of action under RICO. Since the Court of Appeals here rested its decision on the contrary proposition, I concur in the judgment of the Court reversing the decision below.