Court Grants Motion to Dismiss Civil RICO Claims Finding Insufficient Particularity After Rejecting “Alter-ego” Status of Defendants

Ocoro v. Montelongo et al, 2010 WL 3040582 (W.D. Tex., June 19, 2018)

The Court granted the defendants’ motion to dismiss finding that the civil RICO claim did not adequately allege the wire fraud predicates with particularity under Rule 9(b). The Plaintiffs alleged that distinguishing between Montelongo, a real estate instructor, and three of his companies controlled by him was not necessary because the companies were under control of Montelongo and thus the corporate veil of the companies could be pierced

The court rejected the Plaintiffs allegations to apply the alter ego doctrine, discussing that to pierce the corporate veil, a court considers the following factors:

the total dealings of the corporation and the individual, including the degree to which corporate formalities have been followed and corporate and individual property have been kept separately, the amount of financial interest, ownership and control the individual maintains over the corporation, and whether the corporation has been used for personal purposes.

The court found the First Amended Complaint failed to elaborate on any of the above listed factors to a satisfactory extent beyond the conclusory use of the term “corporate shells,” the plaintiffs may not avail themselves of the alter ego doctrine to pierce the corporate veil. Alternatively, a plaintiff may pierce the corporate veil by demonstrating that the owner of a business entity uses that entity “for the purpose of perpetrating, and did perpetrate an actual fraud … for the direct personal benefit of the” owner. The court did not accept this basis because it found the plaintiffs failed to state a RICO claim predicated on fraudulent acts. As they cannot sustain a claim involving fraud, they cannot pierce the corporate veil under a theory of fraud.

The court then stated that the plaintiffs failed to allege wire fraud (18 U.S.C. § 1343) with sufficient particularity under Rule 9(b) because the complaint failed to specifically identify which defendant made each individual fraudulent representation, and how each of those representations furthered the fraudulent scheme.

The court stated that because the Plaintiff failed in pleading a valid corporate veil-piercing theory, the plaintiffs cannot simply treat the defendants as a single entity in this way. Rule 9(b) requires the plaintiffs to say which specific defendant made which particular fraudulent statement to which particular plaintiff at what particular time. The plaintiffs’ allegations do not meet this standard as they do not distinguish exactly which plaintiffs received which communications from which defendants.

Ed Note: This appears an extreme example of a court dismissing a civil RICO claim. The logic is circular, i.e., no alter ego theory because the plaintiffs failed to plead fraudulent acts, but their acts could not have been fraudulent acts because of the very existence of the alter ego theory.

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District Court Finds Sufficient Enterprise “Distinctness” in Civil RICO Claim

Lutrell v. Brannon, 2018 WL 3032993 (D. Kan., June 19, 2018)

The Court denied, in part, and granted, in part, Defendants’ motions to dismiss and motions for judgment on the pleadings.  In so doing, the Court addressed various important civil RICO issues. Plaintiff was a patient whom Defendant Brannon, along with another doctor (Garcia) and entities under their control or which they served on board of directors, allegedly performed unnecessary medical procedures on Plaintiff.

Injury/Standing

The court recognized a private plaintiff cannot recover for emotional, personal, or speculative future injuries under RICO, citing to Safe Streets Alliance v. Hickenlooper, 859 F.3d 865, 888-89 (10th Cir. 2017). Moreover, the circuit courts agree that the requirement of injury to “business or property” excludes all personal injuries including pecuniary losses flowing therefrom. See Jackson v. Sedgwick Claims Mgmt. Servs., Inc., 731 F.3d 556, 564-65 & n.4 (6th Cir. 2013) (citing cases).

The Plaintiff however alleged he has standing to bring these RICO claims because his RICO claims are limited to damages for the money he paid, as a result of defendants’ scheme to defraud, for unnecessary medical treatment, which payments constitute an injury to property under the statute. The court agreed with the Eleventh Circuit in Blevins v. Aksut, 849 F.3d 1016 (11th Cir. 2017), which held that “[i]n the context of unnecessary medical treatment, payment for the treatment may constitute an injury to property” under RICO, because the payments themselves are economic injuries that were for the procedures and did not flow from any personal injuries. The Court concluded that the Tenth Circuit would most likely follow Blevins in this case. See, e.g., Cory v. Aztec Steel Bldg., Inc., 468 F.3d 1226, 1232 (10th Cir. 2006) (noting Congress’s directive that RICO be liberally construed to effectuate its remedial purposes). Plaintiff’s alleged injury in paying for unnecessary treatment did not flow from any personal injury suffered because he received that treatment; rather, the personal injury resulted from his decision to have the allegedly unnecessary treatment in the first place. Accordingly, defendants’ motion to dismiss plaintiff’s RICO claims on the basis of a lack of standing is denied to the extent that plaintiff seeks damages consisting of payments that he made for unnecessary medical treatment.

Enterprise

Plaintiff has alleged an association in fact enterprise consisting of the defendants, who collectively functioned to defraud him. The Defendants argued inadequate “distinctness.” The Court discussed that the Supreme Court has confirmed that “to establish liability under § 1962(c) one must allege and prove the existence of two distinct entities: (1) a ‘person’; and (2) an ‘enterprise’ that is not simply the same ‘person’ referred to by a different name.” See Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001). Defendants argue that plaintiff has not satisfied this distinctness requirement because he generally alleges that all of the defendants formed a single group, acted for each other, and essentially are indistinguishable from each other.

The Court rejected this argument at the pleading stage stating that under Kushner a corporate enterprise and its employee are distinct from each other for purposes of this requirement, even if the employee is the corporation’s sole owner. See id. at 163. Thus, the fact that the parties forming the enterprise may be related by ownership does not necessarily doom plaintiff’s RICO claims. Defendants cite Roberts v. C.R. England, Inc., 318 F.R.D. 457 (D. Utah 2017), in which the court rejected a RICO claim for lack of distinctness. See id. at 489-90. In that case, however, plaintiff had alleged that the defendant and the enterprise were alter egos of each other. See id. at 489. In this case, plaintiff has not alleged that all of the defendants are alter egos of each other.

Operation and Management Test

The Court also rejects one of the legal entities argument that plaintiff’s complaint fails to satisfy the requirement in Section 1962(c) that the person have conducted or participated in the enterprise’s affairs as it argued that it simply provided the BGSS device that was implanted in plaintiff during surgery. According to plaintiff’s allegations, however, OSI was not simply a disinterested party who did nothing more than supply a good that ultimately benefited the enterprise; rather, plaintiff has alleged that OSI joined with others in a scheme to benefit its owner. In Safe Streets, the Tenth Circuit also reiterated that “the defendant need not have primary responsibility for the enterprise’s affairs, a formal position in the enterprise, or significant control over or within the enterprise to be liable under RICO,” and that the enterprise member need only have played “a bit part” in conducting the enterprise’s affairs. See Safe Streets, 859 F.3d at 883-84 (internal quotations omitted) (quoting George, 833 F.3d at 1251). The Court concluded that plaintiff has alleged sufficient facts to satisfy the enterprise element of liability under Section 1962(c).

Predicate Acts—Mail Fraud and Wire Fraud

The Court addressed argument of a legal entity OSI that it cannot have committed mail fraud or wire fraud because it was not involved in the mailing of the bills or the receipt of payments for plaintiff’s treatment. OSI further notes that plaintiff has alleged that “defendants” generally committed the predicate acts. In a case cited by OSI, however, the First Circuit noted that predicate acts under RICO may include aiding and abetting the listed offenses, see Aetna Cas. Sur. Co. v. P & B Autobody, 43 F.3d 1546, 1560 (1st Cir. 1994), and this Court has reached the same conclusion, see Independent Drug Wholesalers Group, Inc. v. Denton, 1993 WL 191393, at *3 (D. Kan. May 13, 1993) (Lungstrum, J.). In addition, a person who “knowingly causes [something] to be delivered by mail” may be guilty of mail fraud, see 18 U.S.C. § 1341, and a person causes the mails to be used if he “does an act with knowledge that the use of the mails will follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not actually intended.” See Pereira v. United States, 347 U.S. 1, 8-9 (1954); see also Aetna, 43 F.3d at 1560 (“plaintiff does not need to prove that each defendant personally used the mails but only that the defendant acted with knowledge that the use of the mails will follow in the ordinary course of business, or acted in circumstances where such use can be reasonably foreseen”) (quoting United States v. Maze, 414 U.S. 295, 299 (1974) ). Thus, the fact that OSI did not itself send out the bills or receive the payments is not dispositive.

But, the allegation that plaintiff has merely referred to “defendants” generally in alleging these predicate acts, requires amendment.

Ed Note: This decision highlights that an association in fact enterprise can consist of all of the defendants and not fail distinctness.

EDNY Provides Civil RICO Primer in Denying Motions to Dismiss RICO Claims Based on Fraud and Bribery

Eagle One Roofing Contractors Inc. v. Dawn M. Acquafredda, 2018 WL 1701939 (E.D.N.Y., March 31, 2018)

The court heard motions to dismiss from two groups of Defendants- Insider Defendants, and the “Accord” Defendants. Insider Defendants were employees of Eagle One, a construction company, who worked with Accord Defendants, subcontractors to Eagle One, in submitting fictitious invoices for work performed. The Accord Defendants consisted of individuals and two legal entities (Accord Inc. and Accord Sales Inc). The court denied motions to dismiss the civil RICO claims of the Accord Defendants, finding a sufficient enterprise, sufficient participation, and sufficient allegation of a pattern of racketeering.
Enterprise
The Enterprise consisted of the Defendants, individuals and entities, who worked together to defraud Eagle One. Defendants claimed that they are separate individuals who have no common association, and Plaintiff’s asserted purpose of the RICO enterprise is identical to the alleged pattern of racketeering activity, and therefore fails to allege distinct conduct establishing an enterprise.
The court made clear that:

(1) there is distinctness between the individual defendants and the enterprise as “[t]his does not foreclose the possibility of a corporate entity being held liable as a defendant under section 1962(c) where it associates with others to form an enterprise that is sufficiently distinct from itself.” Thus, “a defendant may be a RICO person and one of a number of members of the RICO enterprise.” See Moss v. BMO Harris Bank, N.A., 258 F. Supp. 3d 289, 298-99 (E.D.N.Y. 2017) (citing Riverwoods, at 344). Here, the RICO persons are distinct from the alleged RICO enterprise. Not only is the enterprise a corporation with its own employees, but it included the Insider Defendants who were not employees of Accord;
(2) the enterprise was distinct from the underlying conduct that establishes a pattern of racketeering, citing to United States v. Turkette, 452 U.S. 576, 583 (1981). “While the proof used to establish these separate elements may in particular cases coalesce, proof of one does not necessarily establish the other.” Id. “Proof of these separate elements [need not] be distinct and independent, as long as the proof offered is sufficient to satisfy both elements.” United States v. Mazzei, 700 F.2d 85, 89 (2d Cir. 1983), also citing Pavlov v. Bank of New York Co., 25 Fed.Appx. 70, 71 (2d Cir. 2002) “The enterprise need not necessarily have a continuity extending beyond the performance of the pattern of racketeering acts alleged, or a structural hierarchy, so long as it is in fact an enterprise as defined in the statute.” see also Boyle v. United States, 556 U.S. 938, 947 (2009) (“the evidence used to prove the pattern of racketeering activity and the evidence establishing an enterprise may in particular cases coalesce.”). The court further stated that the fact that the purpose of the enterprise is identical with the alleged pattern of racketeering does not preclude the finding of an enterprise. See Fuji Photo Film U.S.A., Inc. v. McNulty, 640 F. Supp. 2d 300, 314 (S.D.N.Y. 2009) (“The Complaint further alleges that the association-in-fact was united by a common purpose, namely that of defrauding [Plaintiff]. Accordingly, Plaintiff has sufficiently pled a RICO enterprise under Rule 8(a).”). *7.
(3) Defendants, except one (Stankey) sufficiently participated in the conduct of the enterprise’s affairs.” Elsevier, Inc. v. W.H.P.R., Inc., 692 F. Supp. 2d 297, 307 (S.D.N.Y. 2010) (citing 18 U.S.C. § 1962(c) (making it unlawful “to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity”) ). see Aerowest GmbH v. Freitag, No. CV-15-2894 (LW), 2016 WL 3636619, at *3 (E.D.N.Y. June 28, 2016) (“While each defendant need not have primary responsibility for the functioning of the enterprise, each must, at least, have some part in directing the affairs of the alleged unit.”).
Racketeering Activity
1) the predicate acts of racketeering activity were sufficiently pleaded addressing the issue of whether “when fraud is alleged against multiple defendants, a plaintiff must plead with particularity by setting forth separately the acts or omissions complained of by each defendant.” Odyssey Re (London) Ltd. v. Stirling Cooke Brown Holdings Ltd., 85 F. Supp. 2d 282, 293 (S.D.N.Y. 2000), aff’d, 2 Fed.Appx. 109 (2d Cir. 2001). The court found that fraud was not pleaded with sufficient particularity with regard to some defendants finding Accord defendants sent invoices requesting payment for work done on the 55 Water Street Job even though no work was being done there at the time. While Eagle One is unable to point to which of the American Express invoices represent actual work and which are fraudulent, the allegations are sufficiently detailed for Rule 9(b). See Fuji, 640 F. Supp. 2d at 315 (“The Complaint alleges that many of the services for which [defendant] billed [plaintiff] were never performed. Although the Complaint does not identify the specific invoice descriptions that pertain to unperformed services, [plaintiff] has provided a schedule of all invoices submitted by [defendant].”).
Thus, because there is no particularity requirement in pleading knowledge or intent, one need only allege facts that carry a strong inference of fraudulent intent, and there is no requirement that the defendant him or herself use the mails. It suffices if the defendant caused them to be used by an agent, or set in motion events which foreseeably would involve their use.” Chevron Corp. v. Donziger, 871 F. Supp. 2d 229, 250 (S.D.N.Y. 2012) (citing United States v. Bortnovsky, 879 F.2d 30, 39 (2d Cir. 1989) ).
In sum, the Complaint identified the particular invoices believed to be false, identified who made them, stated where and when they were made, and explained why they were fraudulent. See Fuji, 640 F. Supp. 2d at 310. Accordingly, Eagle One has sufficiently pleaded fraud with regard to Accord, Yopp, and Carnabuci. Each individual fraudulent invoice can serve as a predicate act of fraud. Alternatively, each job collectively is a single act of fraud. Regardless, Eagle One has established the necessary two predicate acts for a RICO claim.
2) The court found other predicate acts, including commercial bribery and found a pattern as plaintiff alleged that the fraudulent scheme took place “from at least July of 2012 through January of 2015.” This allegation is supported by the invoices that establish that the 55 Water Street job lasted from September 2013 through January 2015, and that the American Express job lasted from July 2012 through October 2014. Because the court has previously determined that Plaintiff has sufficiently pleaded claims of fraud and bribery, Plaintiff has pleaded a pattern of at least two predicate acts of racketeering (the fraudulent invoices from the 55 Water Street job and the American Express job, and the checks from Accord to Eagle One employees), within ten years of each other, that extended for a period longer than two years. THIS IS IMPORTANT SINCE IT SHOWS THE SECOND CIRCUIT MEASURES TIME BY THE PREDICATE ACTS, NOT LENGTH OF THE FRAUDULENT SCHEME.

Conspiracy
The court takes a view contrary to the district’s State Farm case holding because Eagle One failed to plead substantive RICO violations by Stankey or Jack Acquafredda, Eagle One’s conclusory allegation that they too “entered into a scheme to embezzle Eagle One funds” is insufficient, and the RICO conspiracy charges against them are dismissed. Discon, Inc. v. NYNEX Corp., 93 F.3d 1055, 1062-63 (2d Cir. 1996) (“Since we have held that the prior claims do not state a cause of action for substantive violations of RICO, the present [§ 1962(d) ] claim does not set forth a conspiracy to commit such violations.”).
Ed Note: This case provides detailed analysis and case law to support civil RICO claims in which Defendants commonly put forth arguments. The conspiracy analysis still is not congruent with Salinas.

Ninth Circuit Affirms Dismissal of Civil RICO Lawsuit Ruling that Shareholders are not Permitted to pursue RICO actions for Derivative Injuries

Uthe Technology Corp. v. Aetrium, 2018 WL 3215143 (9th Cir., July 2, 2018)

The Court affirmed an order granting summary judgment in favor of the Defendants in a civil action brought under “RICO.” Appellant Uthe Technology Corporation (“Uthe”) is a manufacturer of semiconductor products. Uthe conducted business in Asia through its wholly-owned subsidiary, Uthe Technology (Singapore) Pte Ltd. (“Uthe Singapore”). Uthe alleges that, in 1992, several employees, officers, and directors of Uthe Singapore, along with others—including Defendants-Appellees Aetrium, Inc. (“Aetrium”) and Harry Allen—(collectively, “the Conspirators”) conspired to steal Uthe Singapore’s business by diverting Uthe Singapore’s customers and orders to a newly created company, withholding payments, and taking other actions that harmed the business of Uthe Singapore. Ultimately, these alleged actions caused Uthe to sell Uthe Singapore to some of the Conspirators at a reduced price.

In 2012, arbitration in Singapore concluded that the Conspirators were liable to Uthe for the approximately $9 million difference between the sale price for Uthe Singapore and what Uthe Singapore would have been worth but for the Conspirators’ actions. After the arbitration award, Uthe sought to reopen the case against Aetrium and Allen. Uthe filed a Second Amended Complaint (the “SAC”) in 2012 alleging, among other claims, a treble damages claim under the civil RICO statute. The district court granted Defendants’ motion for summary judgment, finding that Uthe had been fully compensated by the Singapore arbitration award and was barred from seeking treble RICO damages by the “one satisfaction rule.” Uthe appealed and we reversed, holding that Uthe was entitled to pursue treble damages under RICO, provided that any award was offset by the amount of the Singapore arbitration award. Uthe Tech. Corp. v. Aetrium, Inc., 808 F.3d 755, 762 (9th Cir. 2015).

On remand, the case was stayed pending publication of the Supreme Court’s opinion in RJR Nabisco, Inc. v. European Community, ––– U.S. ––––, 136 S.Ct. 2090, 195 L.Ed.2d 476 (2016), which concerned the extraterritorial application of civil RICO claims. After the Supreme Court issued its opinion, Defendants filed yet another summary judgment motion, arguing that Uthe’s remaining injury was not a “domestic injury” within the meaning of RJR Nabisco and, alternatively, that Uthe’s alleged injuries were derivative injuries that could not be redressed through a RICO action.

Derivative Injuries

The court discussed that a derivative injury occurs “[w]here all of a corporation’s stockholders are harmed … solely because they are stockholders,” i.e., the injury to the shareholders is indirect and is “derivative” of the injury to the corporation because the shareholders have been injured “solely because” of their shareholder status. In the RICO context, the court has held that a plaintiff may not use the civil RICO statute to recover for derivative injuries because the plaintiff has no standing to assert a claim for injuries inflicted on a different legal entity (in the case of a shareholder, the corporation in which he owns shares) that affect him only indirectly.

The court affirmed the district court’s order agreeing that Uthe’s remaining alleged injuries are derivative of its stake in Uthe Singapore. Thus, in short, Uthe’s theory below was based on a derivative injury, namely that the Conspirators stole Uthe Singapore’s customers and thus harmed Uthe Singapore’s business, thereby reducing the value of Uthe Singapore’s stock, and harming Uthe itself when Uthe sold its shares.

The court distinguished its holding from those cases which stand for the proposition that, at times, courts may allow a former shareholder to pursue a claim for a derivative injury as part of a direct action in order to avoid a situation in which the former shareholder is left without a remedy, but Uthe’s claim was a derivative injury and thus its argument failed to distinguish its claim from those barred by our precedent.

Accordingly, the Court concluded that because Uthe’s injury is a derivative injury, the district court correctly granted summary judgment on Uthe’s RICO claim.

Fifth Circuit Affirms Previous Rulings that “Whistle Blowers” Do Not Have Standing to Bring Civil RICO Lawsuits

Arroyo v. Oprona, Inc., 2018 WL 2026996 (5th Cir. 2018)

The court affirmed a district court’s grant of a Rule 12(b)(6) motion to dismiss a civil RICO claim de novo, finding that the plaintiff did not establish standing to bring a civil RICO claim” under the RICO statute.

The court found that Arroyo has no standing under the RICO statute to assert her civil RICO claims because the injury Arroyo allegedly suffered stems from her loss of employment after she refused to participate in the scheme headed by Yoxall to defraud the IRS and reported Yoxall’s conduct to Rosen Swiss. “

The court cited to earlier precedent that “whistle blowers do not have standing to sue under RICO for the injury caused by the loss of their job.” “[B]eing discharged for either reporting a RICO violation or refusing to participate in a RICO violation does not flow from the predicate acts” and fails to establish standing to sue under the RICO statute. In other words, Arroyo’s injury resulted from Oprona’s decision to terminate her employment and not from the alleged predicate acts. Thus, Arroyo, as an employee allegedly discharged for reporting and refusing to participate in an activity that violated RICO, lacks standing to sue under the RICO statute.

Ed Note: This holding is consistent with thrust of civil RICO law that injury proximately and directly caused by predicate acts is required for standing. An employer’s act of termination of employment itself is not itself predicate activity.

Second Circuit Affirms Dismissal of Civil RICO Complaint Finding Insufficient Pleading of a “Material Misrepresentation”

Williams v. Affinion Group, LLC, ___ F.3d ___, 2018 WL 2090267 (2d Cir. 2018)

The Complaint alleged that consumers were “duped into believing” that membership programs were being offered by an e-merchant, rather than a company known as Trilegiant, and each time an e-merchant shared a customer’s billing information with Trilegiant, both the e-merchant and Trilegiant “committed an act of wire fraud.” The complaint alleges thousands of acts of mail and wire fraud in furtherance of the RICO enterprise and RICO conspiracy, including Trilegiant’s billing (by transmitting fraudulent charges on credit card bills), use of telephones (in refund mitigation to preserve fraudulent gains), and use of the internet (to initiate the scheme through post-transaction marketing and datapass).

Despite these claims, the Court did not find the allegation of a sufficient scheme to defraud, wherein a plaintiff must provide proof of a material misrepresentation. Neder v. United States, 527 U.S. 1, 25 (1999). The plaintiffs argued that the district court erred by requiring them to allege specific misrepresentations in the use of the mail or wires to satisfy Rule 9(b). While recognizing that mail or wire communications themselves need not contain a false statement. Schmuck v. United States, 489 U.S. 705, 715, 109 S.Ct. 1443, 103 L.Ed.2d 734 (1989), a plaintiff still needs to allege a material misrepresentation as part of the defendants’ scheme to fraud to state a violation of section 1341 or 1343.

The Court agreed with the district court that the complaint here lacked the particularized allegation of an underlying “scheme to defraud” animated by a material misrepresentation, and neither the complaint’s specific discussion of Trilegiant’s allegedly deceptive tactics, nor its conclusory references to Trilegiant’s fraudulent scheme, set forth a material misrepresentation with the requisite particularity. The complaint therefore failed to plead a scheme to defraud. Without an underlying scheme to defraud, the plaintiffs have not alleged a pattern of racketeering.

Ed Note: It is unclear whether the “material misrepresentation” is required to be a mailing or interstate wiring or whether it can be argued that so long as there is particularity of mailings/wirings in furtherance of the scheme, an oral misrepresentation is sufficient. It appears safe to find the material misrepresentation in a predicate act.

Civil RICO Conspiracy

The court also found the conspiracy claim failed as plaintiff failed to allege “the existence of an agreement to violate RICO’s substantive provisions.” Because the alleged conspiracy involved an agreement to commit the same substantive RICO violations the court deemed insufficiently pled, and the plaintiffs have not alleged any further acts that, if carried out, would have satisfied RICO’s requirement of a pattern of racketeering. Citing to Salinas v. United States, 522 U.S. 52, 118 S.Ct. 469, 139 L.Ed.2d 352 (1997).

Ed Note: The court looks at one prong of Salinas, but ignores the preceding sentence that all that is necessary if that the Defendant adopt the scheme. The Court’s view appears to be the prominent view in analyzing civil RICO conspiracy allegations.

Court Denies Motion to Dismiss Civil RICO Complaint Finding Sufficient Distinctness

Murphy v. Gospel of Asia Inc., 2018 WL 2422755 (W.D. Ark., May 29, 2018)

The Court dismissed the motion on the pleadings under Rule 12(c)(2) finding that a legal entity defendants GFA and an affiliate was distinct from an enterprise consisting of GFA, and other legal entities, such as Believers Church, Gospel for Asia-India, Last Hour Ministries, and Love India Ministries, and others, all of which are alleged to be affiliates or associates of the named Defendants.

The court first addressed general rules of distinctness: First, “the person named as the defendant cannot also be the entity identified as the enterprise.” Atlas Pile Driving Co. v. DiCon Fin. Co., 886 F.2d 986, 995 (8th Cir. 1989). Second, “[plaintiffs] cannot circumvent the distinctness requirement by ‘alleging a RICO enterprise that consists merely of a corporate defendant associated with its own employees or agents carrying on the regular affairs of the defendant.’ ” (known as the Riverwoods test).

But, here, these rules did not apply as the Court concluded first, that the allegations in the Complaint make clear that GFA was simply one member of a RICO enterprise consisting of all of the named Defendants. This is more than sufficient to allege a plausible association-in-fact enterprise. *2, citing Atlas Pile Driving, supra., 886 F.2d at 995. Second, the Complaint did not allege a RICO enterprise that consists merely of a corporate defendant associated with its own employees or agents carrying on the regular affairs of the defendant.*3

Moreover, because there remained unresolved factual disputes about whether the named Defendants are distinct from the “RICO enterprise,” judgment on the pleadings was improper.

Editor Notes: There are various givens regarding distinctness (ALWAYS DISTINCT):

(1) Individual defendants are each always distinct from an association in fact solely consisting of themselves as members. See Boyle, Brittingham; Gospel for Asia

(2) Individuals are always distinct from legal entity enterprises. Kushner.

(3) Individual legal entity defendants are always distinct from an association in fact of individuals and unrelated entities or entities not commonly controlled by Defendants. Atlas Pile Driving