Originally published December 12, 2005

Recently the Supreme Court granted certiorari in one case of interest to the business community. Barring extensions, amicus briefs in support of the petitioner will be due on January 26, 2006, and amicus briefs in support of the respondent will be due on March 2, 2006.

Civil RICO—Definition of "Enterprise." RICO, the Racketeer Influenced and Corrupt Organizations Act, makes it a crime for "any person employed by or associated with any enterprise engaged in * * * interstate or foreign commerce, to conduct or participate * * * in the conduct of such enterprise’s affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). Section 1964(c) of the Act authorizes "[a]ny person injured in his business or property by reason of a violation of section 1962" to bring a civil action under RICO. Plaintiffs bringing a RICO claim must plead 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." Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001). "Enterprise" is defined to include "any individual, partnership, corporation, association, or other legal entity." 18 U.S.C. § 1961(4). The Supreme Court granted certiorari in Mohawk Industries, Inc. v. Williams, No. 05-465, to determine whether a corporation may be subject to RICO liability as a "person" conducting or participating in the affairs of an "enterprise" consisting solely of the corporation and its non-employee agents.

Respondents, a class of current and former hourly employees of petitioner Mohawk Industries, filed suit in the Northern District of Georgia alleging that Mohawk depressed the wages of its employees by obtaining illegal workers through an association-in-fact enterprise with third-party employment recruiters. The district court denied Mohawk’s motion to dismiss, 314 F. Supp. 2d 1333 (N.D. Ga. 2004), but certified an interlocutory appeal as to whether respondents had pled the existence of a RICO enterprise. In a per curiam opinion, the Eleventh Circuit affirmed and held that Mohawk and the third-party recruiters constituted "distinct entities" for purposes of alleging a RICO claim. 411 F.3d 1252, 1258.

The Eleventh Circuit explicitly recognized that its decision conflicted with Baker v. IBP, Inc., 357 F.3d 685 (7th Cir.), cert. denied, 125 S. Ct. 412 (2004), in which the Seventh Circuit reached the opposite conclusion in a case involving a materially identical set of circumstances. Writing for the Baker panel, Judge Easterbrook observed that the association of a corporation with third parties performing corporate tasks on its behalf does not create an "enterprise" distinct from the corporation itself. Three additional federal circuits have weighed in on the issue, with the Sixth Circuit supporting Mohawk Industries’ reading of the "enterprise" requirement, and the Second and Third Circuits aligning with the Seventh Circuit’s interpretation.

This question was left open by the Supreme Court in Cedric Kushner Promotions. There, the Court held that an individual employee "who conducts the affairs of a corporation through

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