In the Supreme Court of the United States OCTOBER TERM, 1988 No. 87-1252 H.J. INC., ET AL., PETITIONERS V. NORTHWESTERN BELL TELEPHONE COMPANY, ET AL., RESPONDENTS On Writ of Certiorari to the United States BRIEF FOR THE NATIONAL ASSOCIATION OF MANUFACTURERS AS AMICUS CURIAE IN SUPPORT OF RESPONDENTS INTEREST OF THE AMICUS CURIAE The National Association of Manufacturers of the United States ("NAM") is a voluntary business association of more than 13,000 companies. NAM's member companies employ 85% of all manufacturing workers in the United States and produce over 80% of the nation's manufactured goods. NAM's members have been named as defendants in a number of private civil suits under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Civil RICO suits against legitimate business entities constitute a principal abuse of the statute, as this Court recognized in Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985). The "pattern" element is fundamental to the statutory scheme and, as noted in Sedima, is of central importance in correcting abuses of RICO by limiting the civil cause (1) 2 of action to cases of true racketeering as Congress intended. NAM submits this brief as amicus curiae to address the definition of "pattern" and to apprise the Court of the serious abuses of civil RICO that the business community has faced because of the overbroad reading of the pattern element by many lower courts. INTRODUCTION AND SUMMARY OF ARGUMENT At issue in this case is the definition of the term “pattern" in Section 1961 (5) of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq. In Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n.14 (1985), this Court recognized that the Act does not define "pattern." Since RICO does not provide a definition, it is the proper role of the judiciary to give meaning to the term "pattern" by construing it in accordance with the language, history, and purposes of the statute. Indeed, Sedima charged "the courts to develop a meaningful concept of 'pattern'" in order to correct "[t]he 'extraordinary' uses to which civil RICO has been put" (473 U.S. at 500). Therefore, unlike the situation in Sedimawhere the Court believed that the proposed requirements of a prior conviction and racketeering injury had “no support in the statute's history, its language, or considerations of policy" (id. at 493)—the question presented in this case requires the Court only to engage in the customary judicial function of construing a statutory term that Congress used but did not define. As the Court acknowledged in Sedima, civil RICO has "evolv[ed] into something quite different from the original conception of its enactors" (473 U.S. at 500). The misuse of civil RICO in suits brought against legitimate business entities exacts a heavy price "by saddling legitimate businesses with uncalled-for punitive bills and undeserved labels" (id. at 520 (Marshall, J., dissenting)). Overbroad application of the private treble-damages provision has led to results that Congress could not have in 3 tended: distortion of other federal remedies that Congress and the courts have carefully formulated; extension of federal jurisdiction to encompass routine commercial disputes that are properly the domain of state law and state courts; inundation of the federal courts with complex and protracted RICO cases; and coercive pressure on defendants, confronted with the threat of treble damages and the stigma of the label "racketeer," to settle even meritless claims. For these reasons, abuse of civil RICO presents a problem of great concern both to the bench and bar and to the general public. Under a proper interpretation of RICO, predicate acts of racketeering, to constitute a pattern, must be typical of the way in which the defendant conducts his activities. This definition accords with the plain meaning of the word "pattern" as a regular course of conduct that is characteristic of the defendant's behavior. In addition, it is consistent with the legislative history of RICO and the congressional purpose to level this racketeering statute against professional or career criminals who are engaged in habitual criminality; it was not Congress's intent that RICO broadly encompass every person, including legitimate businesses, alleged to have committed two of the vast array of offenses enumerated in the statute. Finally, this interpretation offers a meaningful and practical solution to the misuse of civil RICO without excluding those situations that were Congress's focus in enacting the statute or interfering with the kinds of criminal prosecutions that the government in fact has brought. Sedima correctly pointed out that the prevalent misuse of civil RICO is "primarily the result" of the absence of a meaningful definition of "pattern" (473 U.S. at 500). This case affords the Court a critical opportunity to curb widespread abuse of the statute by confining the cause of action to those defendants for whom the draconian provisions of RICO were intended: habitual or career criminals. 4 ARGUMENT BECAUSE RICO IS DIRECTED AGAINST CAREER CRIMINALS, THE PATTERN ELEMENT REQUIRES THAT THE PREDICATE ACTS OF RACKETEERING BE TYPICAL AND CHARACTERISTIC OF THE WAY IN WHICH THE DEFENDANT CONDUCTS HIS ACTIVITIES A. A Pattern Of Racketeering Activity Requires "Relationship" And "Continuity" The concept of "pattern" is central to RICO. See Agency Holding Corp. v. Malley-Duff & Assoc., 107 S. Ct. 2759, 2766 (1987) (emphasis in original) ("the heart of any RICO complaint is the allegation of a pattern of racketeering”). In Sedima, the Court, quoting from the legislative history of RICO, stated that it is the "factor of continuity plus relationship which combines to produce a pattern'" (473 U.S. at 496 n.14, quoting S. Rep. No. 617, 91st Cong., 1st Sess. 158 (1969) (emphasis added by the Court)). Following Sedima, the lower courts have reached general agreement on the meaning of "relationship." Predicate acts of racketeering activity meet this requirement if two or more of them are related to each other by means of either their common characteristics or their connection to a common scheme or objective. See, e.g., Morgan v. Bank of Waukegan, 804 F.2d 970, 975 (7th Cir. 1986); Torwest DBC, Inc. v. Dick, 810 F.2d 925, 928 (10th Cir. 1987). This test is in accord with the commonly understood meaning of "relatedness." See, e.g., Webster's New World Dictionary 1198 (2d college ed. 1980). The concept of "continuity" has proven to be more elusive. In our view, the various standards of "continuity" devised by the lower courts represent different attempts to grapple with the same question: when is a defendant's course of criminal conduct sufficiently ongoing and persistent to pose the special threat to society that Congress intended to combat through the severe sanctions of RICO? See, e.g., Flip Mortg. Corp. v. McElhone, 841 5 F.2d 531, 538 (4th Cir. 1988) ("the heightened civil and criminal penalties of RICO are reserved for schemes whose scope and persistence set them above the routine' [because they involve an] extended, widespread, or particularly dangerous pattern of racketeering"). The Eighth Circuit's "multiple schemes" standard is one salutary effort to return civil RICO to its congressionally intended scope. By requiring that the defendant must have engaged in multiple criminal schemes, the Eighth Circuit eliminates most routine commercial disputes from the reach of the statute, thereby curbing the primary abuse of civil RICO. See 116 Cong. Rec. 35193 (1970) (remarks of Rep. Poff) (emphasis added) (a pattern of racketeering activity requires "at least two independent offenses"). There is, however, a more refined standard that is securely grounded in the language and history of RICO and that, we believe, better serves to restrict the statute to its intended sphere. This approach recognizes that the concepts of "pattern" and "continuity" are composed of two elements: recurrence and typicality. Under this test, predicate acts of racketeering have the necessary continuity to form a pattern where (i) at least two of the acts occurred at substantially different times as part of separate criminal episodes or transactions, and (ii) the acts are typical and characteristic of the defendant's conduct. B. The Pattern Standard Requires That The Racketeering Activity Must Have Occurred At Substantially Different Times As Part Of Separate Criminal Episodes Or Transactions As indicated by the common meaning of "pattern" and "continuity," RICO is properly read to require that the defendant must have engaged in repeated and ongoing criminality, not merely in one criminal incident that technically constitutes two offenses. Thus, to constitute a pattern, at least two of the acts of racketeering must have occurred at substantially different times as part of separate criminal episodes or transactions. |