20 are now being brought simply would not be filed under the proposed pattern test. In addition, improper cases that are nevertheless filed could often be dismissed on the pleadings or after preliminary discovery when there is no reasonable basis for concluding that the pattern element could be satisfied. In cases that do proceed to trial, this pattern standard can readily be "explain[ed] to a jury" (Sedima, 473 U.S. at 495 n.12) in the court's instructions. The ultimate issue for the jury on the pattern element is whether the defendant typically and characteristically conducts his activities by means of acts of racketeering. Among the considerations that a jury should take into account in resolving that issue are: (1) the number and frequency of the racketeering acts (or episodes or transactions); (2) the nature of the pedicate acts and any inference that the defendant engaged in that type of crime on an ongoing and regular basis; (3) the extent of the defendant's business that was involved in the racketeering acts; (4) the proceeds that the defendant received from the racketeering acts in relat on to any legitimate sources of income; and (5) any indications that the defendant was not involved in a legitimate business, such as failure to comply with applicable state or federal requirements, an inadequate capital structure, or other earmarks of a "front" or "dummy" company. While it is, of course, possible to envision cases that present close questions of statutory coverage, instru tions along the foregoing lines should provide suitable guidance for the jury's determination of the pattern issue. The nature of the proof necessary to establish a pattern will depend upon the circumstances of the particular case. For example, two instances of certain racketeering offenses such as extortion, contract murder, or arsonfor-hire may provide a basis for a jury to find that the defendant is a professional or habitual criminal, especially if proof of those offenses is accompanied by corroborative evidence such as the absence of any legitimate source of income for the defendant or indications that 21 he planned to commit those crimes in the future. Similarly, a jury could conclude that the pattern element is satisfied by proof of two or more acts of wire or mail fraud by a "shell" corporation whose entire operation involves fraudulent practices the classic "boiler room" scheme. And it would be sufficient to show that the defendant engaged in numerous episodes of racketeering over a significant period of time from which he received substantial income, even though he had lawful income as well. On the other hand, the fact that employees of one division of a large corporation allegedly mailed misleading documents on two or more occasions would not give rise to an inference that the corporate defendant was an habitual criminal and would not be enough to avoid pretrial dismissal of the complaint. In the present case, application of this pattern standard is straightforward and leads to affirmance of the judgment below. The complaint does not, and plausibly could not, allege that Northwestern Bell's business was typically and characteristically conducted through the alleged bribery scheme or other racketeering activity. As the district court determined, "[i]t cannot be said ・・・ that the alleged 'pattern' of predicate acts is a 'regular part of the way' defendants conduct their business" (653 F. Supp. 908, 916). Because Northwestern Bell does not fall within the category of professional criminals against whom RICO was directed, petitioners' complaint was properly dismissed. D. The Pattern Definitions Advanced By Petitioners And As all of the members of the Court agreed in Sedima, civil RICO has been subject to substantial abuse. The pattern definitions proposed by petitioners and the Solicitor General are neither adequate to curtail these abuses nor supported by the language and history of the statute. 22 1. Civil RICO Has Been Subject To Serious Abuse The Court in Sedima recognized that civil RICO has "evolv[ed] into something quite different from the original conception of its enactors" (473 U.S. at 500). Indeed, "private civil actions under the statute are being brought almost solely against [respected and legitimate businesses], rather than against the archetypal, intimidating mobster" (id. at 499). "In practice, [civil RICO] frequently has been invoked against legitimate businesses in ordinary commercial settings" (id. at 506 (Marshall, J., dissenting)), and "private civil actions [are] being brought frequently against respected businesses to redress ordinary fraud and breach of contract cases" (id. at 524 (Powell, J., dissenting)). Former Senator Hruska has also recently noted that civil RICO is being used in ways that Congress did not intend and would not have approved. See Oversight on Civil RICO Suits Brought Under 18 U.S.C. 1964 (c): Hearings Before the Senate Comm. on the Judiciary, 99th Cong., 1st Sess. 9 (1985) ("Senate Hearings"); Note, Civil RICO-What Hath Congress Wrought?, 20 Creighton L. Rev. 1225, 1225 (1987). In fact, as the Department of Justice has observed, civil RICO has become "a general federal anti-fraud remedy," and its application against "traditional organized criminal activities" is "far outweighed" by its use against "reputable businessmen." Senate Hearings, supra, at 140 (statement of Assistant Attorney General Trott). In 1985 and 1986, 92% of all reported civil RICO cases did not involve allegations of racketeering acts characteristic of professional criminal activity; on the contrary, of cases subsequent to Sedima, 59% alleged mail fraud as the predicate offenses, 51% alleged wire fraud, and 20% alleged securities fraud. Blakey & Cessar, 62 Notre Dame L. Rev. at 619, 620. Nearly all of these suits were ordinary civil disputes masquerading as racketeering cases. 23 As noted by Judge Mikva, "a RICO count is filed almost as boilerplate" in many federal suits, much "like the ad damnum clause in a complaint." RICO Reform Legislation: Hearings Before the Subcomm. on Criminal Justice of the House Comm. on the Judiciary, 99th Cong., 1st & 2d Sess. 527 (1985-1986) ("House Hearings"). The reasons for this misuse are self-evident: RICO-by affording treble damages and attorneys' fees, by stigmatizing the defendant as a "racketeer," and by conferring federal jurisdiction-provides an "unusually attractive civil remedy" (id. at 366 (letter from Assistant Attorney General Bolton)). See Sedima, 473 U.S. at 504 (Marshall, J., dissenting). Moreover, unlike criminal enforcement of RICO, private damages suits can be filed by hyper-aggressive litigants and are not restrained by "[t]he responsible use of prosecutorial discretion" (id. at 503 (Marshall, J., dissenting)). Abuse of civil RICO creates a host of undesirable consequences that Congress-in its brief consideration of the private damages provision-surely could not have intended. First, "there has been an explosion of private civil RICO lawsuits" that has placed an "inappropriate and increasingly heavy burden" on the federal courts. House Hearings, supra, at 366 (letter from Assistant Attorney General Bolton). In 1986, more than 1000 private civil RICO cases were filed in federal court;' since approximately one-third to one-half of all civil RICO filings had no other basis for federal jurisdiction (see Blakey & Cessar, 62 Notre Dame L. Rev. at 619, 622), a proper construction of RICO would remove a great deal of burdensome litigation from federal court. 7 By contrast, only 120 criminal RICO indictments were approved for filing by the Department of Justice in 1986. See Goldsmith, RICO and Enterprise Criminality, 88 Colum. L. Rev. 774, 790 n.113 (1988). • These figures do not tell the full story, for, as the Judicial Conference has explained, "the number of civil RICO cases is substantially larger than can be statistically documented" and such cases "require a disproportionately large amount of time to re 24 In addition, overly broad application of civil RICO "displaces important areas of federal law" (Sedima, 473 U.S. at 504 (Marshall, J., dissenting)) by allowing private damages suits without regard to limitations that exist under other federal statutes. See House Hearings, supra, at 365 (letter from Assistant Attorney General Bolton), 529 (statement of Judge Mikva). For instance, as then-SEC Chairman Shad explained, the use of mail and wire fraud as predicate offenses in civil RICO suits "has preempted much of th[e] field" of federal securities laws, thus "substantially altering the balance of private and public rights" that "Congress, the courts, and the Commission have crafted over the past 50 years." House Hearings, supra, at 445-446. See also Sedima, 473 U.S. at 505 (Marshall, J., dissenting). In much the same way, an expansive interpretation of RICO would "federalize[] important areas of civil litigation that until now were solely within the domain of the States," thereby "altering fundamentally the federalstate balance" (Sedima, 473 U.S. at 504 (Marshall, J., dissenting)). Ordinary commercial disputes that otherwise would be subject to state law, and adjudicated in state courts, are now routinely transformed into federal RICO claims. See, e.g., Report of the Proceedings of the Judicial Conference of the United States, Mar. 12-13, 1986, at 11-12 (RICO has "caus[ed] what would formerly have been considered routine breach of contract or common law fraud actions triable only in state courts to be filed in federal courts," which "causes friction with the state court system"). Finally, the bludgeon of civil RICO is frequently used by plaintiffs to coerce lucrative settlements of unmeritorious claims. As Justice Marshall explained in Sedima (473 U.S. at 504, 506 (dissenting opinion)): solve." Report of the Proceedings of the Judicial Conference of the United States, Sept. 21, 1987, at 76. Morcover, "the impact on the federal courts of suits brought under * ** [civil RICO] grows daily more acute." Report of the Proceedings of the Judicial Conference of the United States, Mar. 17, 1987, at 19. |