District Court Finds Association-In-Fact Enterprise Adequately Alleged in Civil RICO Class-Action Litigation and Broadly Construes RICO’s “Conduct” Test

In Re Broiler Chicken Anti-Trust Litigation, 2020 WL 1030674 (N.D. Ill., March 3, 2020)

The court denied defendant Sanderson’s motion to dismiss and found an association in fact enterprise was adequately alleged, and the Defendant Sanderson adequately engaged in the “conduct of the affairs” of that enterprise.

First, the court stated that the heightened pleading standard of Rule 9(b) does not apply to allegations of an “enterprise” under RICO.

Next, plaintiffs had alleged in this class-action that a group of individuals, including Sanderson, known as the Georgia Dock Defendants associated with each other to form and participate in a RICO ‘enterprise.’   The court found the allegations in the Complaint overwhelmingly indicated that the Georgia Dock RICO Defendants conspired to manipulate the Georgia Dock price, whatever their specific means of communication. been noticed. Even though it was possible to manipulate the Georgia Dock price with fewer than all the Georgia Dock RICO Defendants participating, Plaintiffs allegations made it plausible that all the Georgia Dock RICO Defendants colluded to submit prices within a range that took into account the one-cent rule, in order to keep the Georgia Dock price high. The allegations of “relationship” and “purpose” (along with undisputed longevity) were thus sufficient to plausibly allege an “enterprise.”

The court rejected Sanderson’s argument the enterprise was not separate from a “pattern of racketeering activity” because the Supreme Court in Boyle  has said that “the evidence used to prove the pattern of racketeering activity and the evidence establishing an enterprise may in particular cases coalesce.” Boyle, 556 U.S. at 947 (emphasis added). That is true of Plaintiffs’ allegations in this case. Plaintiffs’ allegations plausibly show both common and concerted unlawful activity, because the Georgia Dock price would not have remained high above other prices unless at least a weighted majority of the Georgia Dock RICO Defendants agreed to submit higher prices within a range that avoided being knocked out by the one-cent rule. Sanderson also notes that the Supreme Court has emphasized that allegations of a pattern of racketeering activity “would not be enough to show that the individuals were members of an enterprise,” if the individuals acted “independently and without coordination.” But here, the racketeering activity alleged permits the plausible inference that the fraudulent price submissions were coordinated.

Thus, the allegations do not “collapse” the “two statutory elements” into “one.” It simply acknowledges, as has the Supreme Court, that sometimes the same allegations can be a basis to show both racketeering activity and an enterprise. Despite Sanderson’s argument, this was an uncontroversial conclusion that has been reached by a number of courts.

Thus, the evidence cited in the complaint (both documentary and testimonial), showed that the five Georgia Dock RICO Defendants’ price submissions were always within one cent of the previous week’s price, and were very rarely lower than the previous week’s price plausibly indicating an agreement among those five Georgia Dock RICO Defendants.*4.

Lastly, Sanderson argued in passing that Plaintiffs have failed to allege that Sanderson “conducted” the enterprise, which is another element of the claims.*5.  But Sanderson is “alleged to be part of the enterprise itself,” which is sufficient to allege “conduct” under RICO. MCM Partners, Inc. v. Andrews-Bartlett & Assocs., Inc., 62 F.3d 967, 979 (7th Cir. 1995). The allegation of Sanderson’s express agreement with the other Georgia Dock RICO Defendants to submit fraudulent prices to the Georgia Dock, which the Court finds Plaintiffs have plausibly alleged, is sufficient to allege “conduct.” See In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 378 (3d Cir. 2010) (“[I]f defendants band together to commit [violations] they cannot accomplish alone … then they cumulatively are conducting the association-in-fact enterprise’s affairs, and not [simply] their own affairs.”).

Ed Note:   The Seventh Circuit’s district courts sometimes take a very hard line on civil RICO elements, such as the “pattern of racketeering” element, not addressed herein, but an expansive, and yet correct interpretation of an ‘association in fact enterprise.’



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