The H.J. v. Northwest Bell Telephone case is provided for Birdsong’s White Collar Crime students as part of their required reading during week 8 of the course when we begin our study of the RICO law.
H.J. Inc. v. Northwestern Bell Telephone Co.
492 U.S. 229, 109 S.Ct. 2893
June 26, 1989
Justice BRENNAN delivered the opinion of the Court.
We are called upon in this civil case to consider what conduct meets RICO’s pattern requirement.
Petitioners, customers of respondent Northwestern Bell Telephone Co., filed this putative class action in 1986 in the District Court for the District of Minnesota. Petitioners alleged violations of §§ 1962(a), (b), (c), and (d) by Northwestern Bell and the other respondents-some of the telephone company’s officers and employees, various members of the Minnesota Public Utilities Commission (MPUC), and other unnamed individuals and corporations-and sought an injunction and treble damages under RICO’s civil liability provisions, §§ 1964(a) and (c).
The MPUC is the state body responsible for determining the rates that Northwestern Bell may charge. Petitioners’ five-count complaint alleged that between 1980 and 1986 Northwestern Bell sought to influence members of the MPUC in the performance of their duties-and in fact caused them to approve rates for the company in excess of a fair and reasonable amount-by making cash payments to commissioners, negotiating with them regarding future employment, and paying for parties and meals, for tickets to sporting events and the like, and for airline tickets. Based upon these factual allegations, petitioners alleged in their first count a pendent state-law claim, asserting that Northwestern Bell violated the Minnesota bribery statute, Minn.Stat. § 609.42 (1988), as well as state common law prohibiting bribery. They also raised four separate claims **2898 under § 1962 of RICO. Count II alleged that, in violation of § 1962(a), Northwestern Bell derived income from a pattern of racketeering activity involving predicate acts of bribery and used *234 this income to engage in its business as an interstate “enterprise.” Count III claimed a violation of § 1962(b), in that, through this same pattern of racketeering activity, respondents acquired an interest in or control of the MPUC, which was also an interstate “enterprise.” In Count IV, petitioners asserted that respondents participated in the conduct and affairs of the MPUC through this pattern of racketeering activity, contrary to § 1962(c). Finally, Count V alleged that respondents conspired together to violate §§ 1962(a), (b), and (c), thereby contravening § 1962(d).
The District Court granted respondents’ Federal Rule of Civil Procedure 12(b)(6) motion, dismissing the complaint for failure to state a claim upon which relief could be granted. 648 F.Supp. 419 (Minn.1986). The court found that “[e]ach of the fraudulent acts alleged by [petitioners] was committed in furtherance of a single scheme to influence MPUC commissioners to the detriment of Northwestern Bell’s ratepayers.” Id., at 425. It held that dismissal was therefore mandated by the Court of Appeals for the Eighth Circuit’s decision in Superior Oil Co. v. Fulmer, 785 F.2d 252 (1986), which the District Court interpreted as adopting an “extremely restrictive” test for a pattern of racketeering activity that required proof of “multiple illegal schemes.” 648 F.Supp., at 425.FN1 The Court of Appeals for the Eighth Circuit affirmed the dismissal of petitioners’ complaint, confirming that under Eighth Circuit precedent “[a] single fraudulent effort or scheme is insufficient” to establish a pattern of racketeering*235 activity, 829 F.2d 648, 650 (1987), and agreeing with the District Court that petitioners’ complaint alleged only a single scheme, ibid. Two members of the panel suggested in separate concurrences, however, that the Court of Appeals should reconsider its test for a RICO pattern. Id., at 650 (McMillian, J.); id., at 651 (J. Gibson, J.). Most Courts of Appeals have rejected the Eighth Circuit’s interpretation of RICO’s pattern concept to require an allegation and proof of multiple schemes,FN2 and we granted certiorari to resolve**2899 this conflict. 485 U.S. 958, 108 S.Ct. 1219, 99 L.Ed.2d 420 (1988). We now reverse.
Section 1961(5) does indicate that Congress envisioned circumstances in which no more than two predicates would be necessary to establish a pattern of racketeering**2900 -otherwise it would have drawn a narrower boundary to RICO liability, requiring proof of a greater number of predicates. But, at the same time, the statement that a pattern “requires at least” two predicates implies “that while two acts are necessary, they may not be sufficient.” *238 Sedima, 473 U.S., at 496, n. 14, 105 S.Ct., at 3285, n. 14; id., at 527, 105 S.Ct., 3289 (Powell, J., dissenting). Section 1961(5) concerns only the minimum number of predicates necessary to establish a pattern; and it assumes that there is something to a RICO pattern beyond simply the number of predicate acts involved. The legislative history bears out this interpretation, for the principal sponsor of the Senate bill expressly indicated that “proof of two acts of racketeering activity, without more, does not establish a pattern.” 116 Cong.Rec. 18940 (1970) (statement of Sen. McClellan). Section § 1961(5) does not identify, though, these additional prerequisites for establishing the existence of a RICO pattern.
In addition to § 1961(5), there is the key phrase “pattern of racketeering activity” itself, from § 1962, and we must “start with the assumption that the legislative purpose is expressed by the ordinary meaning of the words used.” Richards v. United States, 369 U.S. 1, 9, 82 S.Ct. 585, 591, 7 L.Ed.2d 492 (1962). In normal usage, the word “pattern” here would be taken to require more than just a multiplicity of racketeering predicates. A “pattern” is an “arrangement or order of things or activity,” 11 Oxford English Dictionary 357 (2d ed. 1989), and the mere fact that there are a number of predicates is no guarantee that they fall into any arrangement or order. It is not the number of predicates but the relationship that they bear to each other or to some external organizing principle that renders them “ordered” or “arranged.” The text of RICO conspicuously fails anywhere to identify, however, forms of relationship or external principles to be used in determining whether racketeering activity falls into a pattern for purposes of the Act.
It is reasonable to infer, from this absence of any textual identification of sorts of pattern that would satisfy § 1962‘s requirement, in combination with the very relaxed limits to the pattern concept fixed in § 1961(5), that Congress intended to take a flexible approach, and envisaged that a pattern might be demonstrated by reference to a range of different ordering principles or relationships between predicates, within the expansive bounds set. For any more specific guidance as *239 to the meaning of “pattern,” we must look past the text to RICO’s legislative history, as we have done in prior cases construing the Act. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S., at 486-490, 105 S.Ct., at 3279-3282 (majority opinion); id., at 510-519, 105 S.Ct., at 3297-3302 (MARSHALL, J., dissenting); id., at 524-527, 105 S.Ct., at 3287-3289 (Powell, J., dissenting); Russello v. United States, supra, at 26-29, 104 S.Ct., at 302-304; United States v. Turkette, 452 U.S. 576, 586-587, 589-593, 101 S.Ct. 2524, 2530-2531, 2531-2534, 69 L.Ed.2d 246 (1981).
The legislative history, which we discussed in Sedima, supra, 473 U.S., at 496, n. 14, 105 S.Ct., at 3285, n. 14, shows that Congress indeed had a fairly flexible concept of a pattern in mind. A pattern is not formed by “sporadic activity,” S.Rep. No. 91-617, supra, p. 158 (1969), and a person cannot “be subjected to the sanctions of title IX simply for committing two widely separated and isolated criminal offenses,” 116 Cong. Rec., at 18940 (1970) (Sen. McClellan). Instead, “[t]he term ‘pattern’ itself requires the showing of a relationship” between the predicates, ibid., and of “ ‘the threat of continuing activity,’ ” ibid., quoting S.Rep. No. 91-617, at 158. “It is this factor of continuity plus relationship which combines to produce a pattern.” Ibid. (emphasis added). RICO’s legislative history reveals Congress’ intent that to prove a pattern of racketeering activity a plaintiff or prosecutor must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity.
FN3. Nor does the multiple scheme approach to identifying continuing criminal conduct have the advantage of lessening the uncertainty inherent in RICO’s pattern component, for “ ‘scheme’ is hardly a self-defining term.” Barticheck v. Fidelity Union Bank/First National State, 832 F.2d, at 39. A “scheme” is in the eye of the beholder, since whether a scheme exists depends on the level of generality at which criminal activity is viewed. For example, petitioners’ allegation that Northwestern Bell attempted to subvert public utility commissioners who would be voting on the company’s rates might be described as a single scheme to obtain a favorable rate, or as multiple schemes to obtain favorable votes from individual commissioners on the ratemaking decision. Similarly, though interference with ratemaking spanning several ratemaking decisions might be thought of as a single scheme with advantageous rates as its objective, each ratemaking decision might equally plausibly be regarded as distinct and the object of its own “scheme.” There is no obviously “correct” level of generality for courts to use in describing the criminal activity alleged in RICO litigation. Because of this problem of generalizability, the Eighth Circuit’s “scheme” concept is highly elastic. Though the definitional problems that arise in interpreting RICO’s pattern requirement inevitably lead to uncertainty regarding the statute’s scope-whatever approach is adopted-we prefer to confront these problems directly, not “by introducing a new and perhaps more amorphous concept into the analysis” that has no basis in text or legislative history. Ibid.
FN4. Insofar as the concurrence seems to suggest, post, at 2907-2908, that very short periods of criminal activity that do not in any way carry a threat of continued criminal activity constitute “obvious racketeer[ing]” to which Congress intended RICO, with its enhanced penalties, to apply, we have concluded that it is mistaken, and that when Congress said predicates must demonstrate “continuity” before they may form a RICO pattern, it expressed an intent that RICO reach activities that amount to or threaten long-term criminal activity.
One evident textual problem with the suggestion that predicates form a RICO pattern only if they are indicative of an organized crime perpetrator-in either a traditional or functional sense-is that it would seem to require proof that the racketeering acts were the work of an association or group, rather than of an individual acting alone. RICO’s language supplies no grounds to believe that Congress meant to impose such a limit on the Act’s scope. A second indication from the text that Congress intended no organized crime limitation is that no such restriction is explicitly stated. In those titles of OCCA where Congress did intend to limit the new law’s application to the context of organized crime, it said so. Thus Title V, authorizing the witness protection program, stated that the Attorney General may provide for the security of witnesses “in legal proceedings against any person alleged to have participated in an organized criminal activity.” 84 Stat. 933, note preceding 18 U.S.C. § 3481 *245 since repealed). And Title VI permitted the deposition of a witness to preserve testimony for a legal proceeding, upon motion by the Attorney General certifying that “the legal proceeding is against a person who is believed to have participated in an organized criminal activity.” 18 U.S.C. § 3503(a). Moreover, Congress’ approach in RICO can be contrasted with its decision to enact explicit limitations to organized crime in other statutes. E.g., Omnibus Crime Control and Safe Streets Act of 1968, § 601(b), Pub.L. 90-351, 82 Stat. 209 (defining “organized crime” as “the unlawful activities of the members of a highly organized, disciplined association engaged in supplying illegal goods and services, including but not limited to gambling, prostitution, loan sharking, narcotics, labor racketeering, and other unlawful activities of members of such organizations”). Congress’ decision not explicitly to limit RICO’s broad terms strongly implies that Congress had in mind no such narrow and fixed idea of what constitutes a pattern as that suggested by amici here.
It is argued, nonetheless, that Congress’ purpose in enacting RICO, as revealed in the Act’s title, in OCCA’s preamble, 84 Stat. 923 (Congress seeking “the eradication of organized crime in the United States”), and in the legislative history, was **2904 to combat organized crime; and that RICO’s broad language should be read narrowly so that the Act’s scope is coextensive with this purpose. We cannot accept this argument for a narrowing construction of the Act’s expansive terms.
To be sure, Congress focused on, and the examples used in the debates and reports to illustrate the Act’s operation concern, the predations of mobsters. Organized crime was without a doubt Congress’ major target, as we have recognized elsewhere. See Russello, 464 U.S., at 26, 104 S.Ct., at 302; Turkette, 452 U.S., at 591, 101 S.Ct., at 2532. But the definition of a “pattern of criminal conduct” in Title X of OCCA in terms only of the relationship between criminal acts, see supra, at 2901, shows that Congress*246 was quite capable of conceiving of “pattern” as a flexible concept not dependent on tying predicates to the major objective of the law, which for Title X as for Title IX was the eradication of organized crime. See 84 Stat. 923. Title X’s definition of “pattern” should thus create a good deal of skepticism about any claim that, despite the capacious language it used, Congress must have intended the RICO pattern element to pick out only racketeering activities with an organized crime nexus. And, indeed, the legislative history shows that Congress knew what it was doing when it adopted commodious language capable of extending beyond organized crime.
“The danger posed by organized crime-type offenses to our society has, of course, provided the occasion for our examination of the working of our system of criminal justice. But should it follow … that any proposals for action stemming from that examination be limited to organized crime?
“[T]his line of analysis … is seriously defective in several regards. Initially, it confuses the occasion for reexamining an aspect of our system of criminal justice with the proper scope of any new principle or lesson derived from that reexamination.
“The objection, moreover, has practical as well as theoretical defects. Even as to the titles of [the OCCA bill] needed primarily in organized crime cases, there are very real limits on the degree to which such provisions can be strictly confined to organized crime cases…. On the other hand, each title … which is justified primarily in organized crime prosecutions has been confined to such cases to the maximum degree possible, while preserving the ability to administer the act and its effectiveness as a law enforcement tool.” 116 Cong. Rec. 18913-18914 (1970).
Representative Poff, another sponsor of the legislation, also answered critics who complained that a definition of “organized crime” was needed:
As this Court stressed in Sedima, in rejecting a pinched construction of RICO’s provision for a private civil action, adopted by a lower court because it perceived that RICO’s use against non-organized-crime defendants was an “abuse” of the Act, “Congress wanted to reach both ‘legitimate’ and ‘illegitimate’ enterprises.” 473 U.S., at 499, 105 S.Ct., at 3286. Legitimate businesses “enjoy neither an inherent incapacity for criminal activity nor immunity from its consequences”; and, as a result, § 1964(c)‘s use “against respected businesses allegedly engaged in a pattern of specifically identified criminal conduct is hardly a sufficient reason for assuming that the provision is being misconstrued.” Ibid. If plaintiffs’ ability to use RICO against businesses engaged in a pattern of criminal acts is a defect, we said, it is one “inherent in the statute as written,” and hence beyond our power to correct. Ibid. RICO may be a poorly drafted statute; but rewriting it is a job for Congress, if it is so inclined, and not for this Court. There is no more room in RICO’s “self-consciously expansive language and overall approach” for the imposition of an organized crime limitation than for the “amorphous ‘racketeering injury’ requirement” we rejected in Sedima, see **2906 id., at 495, 498, 105 S.Ct., at 3284, 3286. We thus decline the invitation to invent a rule that RICO’s pattern of racketeering concept requires an allegation and proof of an organized crime nexus.
Under the analysis we have set forth above, and consistent with the allegations in their complaint, petitioners may be able to prove that the multiple predicates alleged constitute “a pattern of racketeering activity,” in that they satisfy the requirements of relationship and continuity. The acts of bribery alleged are said to be related by a common purpose, to influence commissioners in carrying out their duties in order to win approval of unfairly and unreasonably high rates for Northwestern Bell. Furthermore, petitioners claim that the racketeering predicates occurred with some frequency over at least a 6-year period, which may be sufficient to satisfy the continuity requirement. Alternatively, a threat of continuity of racketeering activity might be established at trial by showing that the alleged bribes were a regular way of conducting Northwestern Bell’s ongoing business, or a regular way of conducting or participating in the conduct of the alleged and ongoing RICO enterprise, the MPUC.