# Amicus Curiae Brief — American Nat. Bank & Trust Co. of Chicago v. Haroco, Inc.

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0144%3A08

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1985
- **Citation:** 473 U.S. 606

## Text

a
%
“a
w No. 84-822

IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1984

AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, et al.,

Petitioner,
V.
HAROCO, INC., et al.,
Respondents.

ON WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

MOTION OF THE INTERINSURANCE EXCHANGE OF
THE AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA
FOR LEAVE TO FILE A BRIEF AS AMICUS CURIAE
IN SUPPORT OF RESPONDENTS
AND BRIEF AMICUS

GILBERT, KELLY, CROWLEY & JENNETT
JAMES M. FISCHER (Of Record)
PATRICK MESISCA, JR.
515 South Figueroa Street
16th Floor
Los Angeles, California 90071
Telephone: (213) 622-5200

Attorneys for Amicus Curiae

—

Westside Law Publishers Los Angeles, California (213) 477-0491 a £

No. 84-822

IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1984

AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, et al.,

Petitioner,

Vv.
HAROCO, INC., et al.,

Respondents.

MOTION OF THE INTERINSURANCE EXCHANGE OF
THE AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA
FOR LEAVE TO FILE A BRIEF AS AMICUS CURIAE
IN SUPPORT OF RESPONDENTS
AND BRIEF AMICUS

a
a

To the Honorable, the Chief Justice of the United
States and the Associate Justices of the Supreme Court
of the United States:

The Interinsurance Exchange of the Automobile Club
of Southern California respectfully moves, pursuant to
Rule 36 of the Rules of this Court, for leave to file
the attached brief as amicus curiae.

Respondent Haroco, Inc. has consented to the filing
of this Amicus Brief; Petitioner American National Bank
& Trust Company of Chicago has refused consent.

INTERESTS OF AMICUS CURIAE

This brief is submitted by the Interinsurance Exchange
of the Automobile Club of Southern California
[“EXCHANGE".

The EXCHANGE insures over one million automobiles
in the State of California through over 650 thousand
policies. The EXCHANGE is the 12th largest automobile
insurance carrier in the United States. Best's Aggregate
and Averages, Private Passenger Automobile Ranking
for 1983, 58 (1984 45th ed.). The EXCHANGE is the
plaintiff in a civil RICO action now pending in the United
States District Court for the Central District of
California, Interinsurance Exchange v. Delug, e¢ al., Civ.
No. 84-8651 (MAP) (filed November 8, 1984).

This case involves a claim that Petitioner Bank’s
practices of keying certain of its loans to the “prime
rate” constituted a violation of Title IX of the Organized
Crime Control Act of 1970 (RICO). Both Petitioner
and Amicus American Banking Association have
emphasized the inappropriateness of using civil RICO
to address what is characterized as an “ordinary, run
of the mill” business dispute.

Amicus is a member of an industry which has a vital
need to preserve civil RICO as a means to combat the
enormous and increasing costs imposed on society and
the insurance industry by insurance fraud. These costs,
frequently imposed by persons engaged in organized
criminal enterprises, are ultimately passed on to
consumers [insureds] in the form of higher premiums.
These insureds have no recourse against these illegitimate

ili

enterprises. Insurers, on behalf of their insureds, believe
that civil RICO is an effective remedy against these
illegitimate enterprises. Amicus requests permission to
present the arguments in the attached Brief, arguments
keyed to the needs of the insurance industry, arguments
in favor of preserving RICO as a viable civil remedy
which may be used to attack root and branch the cancer
of insurance fraud.

WHEREFORE, it is respectfully requested that the Court
grant leave to the Interinsurance Exchange of the
Automobile Club of Southern California to file the
attached Brief as Amicus Curiae.

Respectfully submitted,

JAMES M. FISCHER
Counsel of Record

PATRICK MESISCA, JR.
GILBERT, KELLY, CROWLEY & JENNETT

Attorneys for Amicus Curiae
INTERINSURANCE EXCHANGE OF THE
AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA
515 South Figueroa Street, Suite 1600
Los Angeles, California 90071
(213) 622-5200

EE Ee

Vv
TOPICAL INDEX

Page

Interests Of Amicus Curiae ........................00000005. ll

Summary Of The Argument...........................000.. 3

A. A Person is Injured in his Business or Property
by Reason of a Violation of Section 1962
Whenever His Injury is Fairly Traceable to the
Conduct that Constitutes the Violation of
FRESE, EU REE, : U CER

1. Section 1964(c) Imposes a Simple Cause
Oe I icnccsescscasuenenecnacedocs

2. There Is No Basis For Limiting Civil
RICO Actions To Injuries Resulting
Exclusively From The Fact Of A
“Violation” Of Section 1962. ...................

3 Section 1964(c) Does Not Create a
Proximate Or Legal Cause Requirement
that Incorporates Section 1962(c)..............

B. Section 1962(c) Only Requires That The
Conduct That Constitutes the Predicate Acts
Be Related to the Activities of the RICO
SIE viiicivasaneaundsannsaawissamieaase ancien

6 Se ai he eat a 5 A nay oe OT in tek i cet sabe

8

12

TABLE OF AUTHORITIES CITED
Cases Page
American National Bank v. Haroco, No. 84-822 ...

SOPOT CEs AOE PEO on Se es MONRO eT 2,3
Banker’s Trust Co. v. Rhoades, 741 F.2d 511 (2d
Cir. 1984), pet. for cert. pending, 53 U.S.L.W.
SOT CEM, Be, GOD vccccneccccccvncecccccecscsces 6, 8,9
Bennett v. Berg, 710 F.2d 1361 (8th Cir.), cert.
denied, 104 S. Ct. 527 (1984) ....0..0.. 000. c ccc. 12
Duke Power Co. v. Carolina Environmental Study
Group, 438 U.S. 59 (1978)... 000.0. 6
Escondido Mutual Water Company v. La Jolla,
U.S. —_, 104 S. Ct. 2105 (1984)............ 8
Haroco v. American National Bank, No. 84-822 ...
cael ae nduldenubatisnduitaaebabedcaieeesorececcunatn ah ie
Haroco, Inc. v. American National Bank, 747 F.2d
PT, TD oe cc dak oc cosbecswcicnens 6
Perrin v. United States, 444 U.S. 37 (1979) ............. 7
Russello v. United States, _U.S._, 104 S. Ct. 296
RET Ee DO Ae eT es eT) ee ae 14
Sedima S.P.L.R. v. Imrex Co., Inc. 741 F.2d 482
IR Soe se 2, 3, 4,6
Tennessee Valley Auth. v. Hill, 437 U.S. 153 (1978)
SE es RP RS APE Tl Ee ae 4
United States v. Cauble, 706 F.2d 1322 (Sth Cir. °
1983), cert. denied, 104 S. Ct. 996 (1984)......... 16
United States v. Elliott, 571 F.2d 880 (Sth Cir.),
cert. denied sub nom., Delph v. United States,
I Py PID gv cbiicsinccvasiedcvecodoeedavaces 13, 14
United States v. Forsythe, 560 F.2d 1127 (3d ed.
SEER ITD er SO Eee eee eae 17
United States v. Mandel, 591 F.2d 1347 (4th Cir.
BEE Se eC EES eae 12, 13

vii

United States v. Mandell, 415 F.Supp. 997 (D. Md.
1976), aff'd by equally divided Court 602 F.2d
653 (4th Cir. 1979), cert. denied, 445 U.S. 961
(19BO)..................ceeeeeeees Rravadstnecdikese 16-17

United States v. Nerone, 563 F.2d 836 (7th Cir. ,
1977), cert. denied sub nom. Helfer v. United

States, 435 U.S. 951 (1978) «20.0000... ccec ee. 15
United States v. Provenzano, 688 F.2d 194 (3d Cir.),

cert. denied, 459 U.S. 1071 (1982).................. 17
United States v. Public Utilities Comm’n, 345 U.S.

RIMES TE Fiesty Wb 0c i 4
United States v. Raynor, 302 U.S. 540 (1938)......... 14

United States v. Scotto, 641 F.2d 47 (2d Cir. 1980),
(Oakes, J.), cert denied, 452 U.S. 961
I kc ecintitan cts tie on oP eit 13, 16

United States v. Stofsky, 409 F.Supp. 609 (S.D.N.Y.
1973), aff'd, 527 F.2d 237 (2d Cir. 1975), cert.
Gg FP BE II ao veisevececcccccccncccccsesc. 13

United States v. Turkette, 452 U.S. 576 (1982)......
jnidhdainbibhadccceseentuesaeremaiaretindinnsadcad 11, 14, 17, 18

Statutes
18 United States Code
ERT a es a Eien Ried eines 5, 6, 8, 12, 13, 16
cede baka AG ina'sds cits tigate passim
de ERIE EE Ce 4, 5,9, 10, 11, 18
Rules

Other Authorities

American Heritage Dictionary of the’ English
BRE eM a Pee Ra ere ee 7

Best's Aggregate and Averages, Private Passenger

Automobile Ranking for 1983, 58 (1984 45th
ME adahalanintbtntiancds bauialdentone uhh nuddidécecdes<iscen ll

oe PNT I
-

viii

Blakely, The RICO Civil Fraud Action in Context:
Reflections on Bennett v. Berg, 58 Notre Dame
I a ec i i da ea 2

Count» of Los Angeles, Blue Ribbon Commission
6.1 Automobile Insurance, 19 (Final Report

New York Times, July 6, 1980, at 27, Col. 1, at
28, Col. 4 (from G. Patrick Riggs of the
American Insurance Association) ................... 2
Oxford English Dictionary, p. 1231 (VII In Phrases) 7
Roget’s International Thesaurus, p. 429, 656.8 (3d

SO EE Ae 72 eC 7
Title IX the Organized Criminal Control Act of
RE a a oe passim
W. Prosser & W. Page Keeton, The Law of Torts,
EE ae ON DE 10, 1
Webster’s Third New International Dictionary, p.
Pt cdcbbintddwsisiinpccniabiibenokbiniantistadie 7, 14, 15
2A Sutherland Statutory Construction, Section
I Oe Pe iivadnnancusiuvenceseveacees 14-15
SA Words & Phrases, p. 824 (1968)................0...... 7
116 Cong. Rec., part 26, Oct. 7, 1970, p. 35344....... 16

No. 84-822

IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1984

AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, et al.,

Petitioner,

Vv.
HAROCO, INC., et al.,

Respondents.

MOTION OF THE INTERINSURANCE EXCHANGE OF
THE AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA
FOR LEAVE TO FILE A BRIEF AS AMICUS CURIAE
IN SUPPORT OF RESPONDENTS
AND BRIEF AMICUS

This brief is submitted by the Interinsurance Exchange
of the Automobile Club of Southern California
("EXCHANGE").

Insurance fraud has been calculated to cost the
American public in excess of 11 billion dollars a year.
Insurance losses due to fraudulent claims are prolifer-
ating. Indeed, the American Insurance Association

7
“-

estimates that i5-20 percent of all insurance claims are
fraudulent.! Automobile insurance fraud alone is costing
American consumers 5 billion dollars annually, and over
1.5 billion dollars in California. County of Los Angeles,
Blue Ribbon Committee on Automobile Insurance 19
(Final Report 1984). Many of these fraudulent claims
contribute to caseload congestion that afflicts both state
and federal courts to the detriment of legitimate users
of the civil adjudicatory system.

With increasing frequency insurers are relying on the
civil remedies contained in Title IX of the Organized
Crime Control Act of 1970 (RICO) to attack insurance
fraud by focusing on those whose combined efforts result
in illegal insurance claims.

Amicus has a strong interest in assuring that the
decisions rendered by this Court in Sedima S.P.L.R.
v. Imrex Co., Inc., No. 84-648 and American National
Bank of Haroco, No. 84-822, be made with recognition
that a wide range of illegitimate conduct supports
recourse to RICO. Too much has been already made
by some courts of the perceived misuse(s) of RICO, based
in large part, on the identity of the defendants.? Amicus

'New York Times, July 6, 1980, at 27, col. 1, at 28, col. 4 (from
G. Patrick Riggs of the American Insurance Association). In Los
Angeles County, staged accidents alone are projected to be between
100-200 million dollars a year. County of Los Angeles, Blue Ribbon
Commission on Automobile Insurance, 19 (Final Report 1984).
See generally, Blakely, The RICO Civil Fraud Action in Context:
Reflections on Bennett v. Berg, 58 Notre Dame L.Rev. 237, 344-
45 (1982) (collecting statistics on damages resu!ting from fraud and
other offenses).

Thus, the circuit court in Sedima S.P.L.R. v. Imrex Co., Inc.
741 F.2d 482, 487 (2d Cir. 1984) stated:

Given the general purpose of the RICO legislation,
the uses to which private civil RICO has been put have
been extraordinary, if not outrageous. Section 1964(c)

respectfully submits that the correctness of the
application of a statute turns not on the name of the
defendant but on the determination of whether the
conduct complained of is addressable by the statutory
scheme.

No insurer willingly pays fraudulent claims. Existing
natterns of insurance fraud make detection difficult. The
combination of claimants, doctors, lawyers, and their
insiders helps to create a strong facade of respectibility
to the claims. And even when the facade is cracked in
individual cases, the dismissal or abandonment of the
fraudulent claim becomes simply a cost of doing business
to the enterprise. Civil RICO provides insurers with the
means to seek out and destroy these illegal enterprises.

SUMMARY OF THE ARGUMENT

The proper construction and application of the private
remedies contained in RICO have generated consider-
able opinion writing and disagreement among the
Circuits. The two cases now before this court, Haroco
v. American National Bank, No. 84-822, and Sedima
S.P.R.L. v. Imrex Co., No. 84-6483, exemplify this
disagreement and division.

has not proved particularly useful for generating treble
damage actions against mobsters by victimized business
people. It has, instead, led to claims against such
respected and legitimate “enterprises” as the American
Express Company, E.F. Hutton & Co., Lloyd’s of
London, Bear Stearns & Co., and Merrill Lynch
[footnote omitted], to name a few defendants labeled
as “racketeers” in civil RICO claims resulting in
published decisions.

3The conviction requirement suggested by the Second Circuit
in Sedima is not involved in the Haroco decision. Amicus supports
in full the arguments made by the States who joined in the Amicus
Brief in Support of Petitioner in Sedima S.P.L.R. v. Imgex Co.,
Inc., No. 84-648 (Brief filed Feb. 28, 1985).

Some courts, perhaps unhappy with the extension of
RICO’s private remedies to what those courts have
characterized as “garden variety fraud,” and concerned
with the prospect of perhaps an unwise use of RICO
in particular cases, have offered strained interpretations
of the language of RICO.‘ These courts have discarded
a contextually more likely interpretation for a less
plausible one which is more consistent with their view
of the benefits and wisdom of RICO. Such an attitude
characterizes the Sedima case now before this Court.
The Seventh Circuit on the other hand correctly
recognized its institutional responsibility, as stated by
this Court in Tennessee Valley Auth. v. Hill, 437 U.S.
153 (1978), to apply the statute as written and not engage
in judicial revisionism of legislative history to avoid plain
statutory language. 747 F.2d at 398-99. The polestar
of statutory construction is not judicial appreciation of
the wisdom or lack thereof in a statute, but rather the
language of the statute itself. As most eloquently
expressed by Justice Jackson, statutory construction
must proceed “by analysis of the statute instead of by
psychoanalysis of Congress.” United States v. Public
Utilities Comm'n, 345 U.S. 295, 319 (1953) (Jackson,
J., concurring).

It is evident that some lower courts, and the Second
Circuit in particular, have impiemented their concerns
over the wisdom and approrriateness of civil RICO via
a strained and unnatural construction of RICO’s
causation requirements. This strained construction has
been followed by petitioner by its treating as interchan-
geable the causation element in Section 1964(c) of RICO
and the language in Section 1962(c) which defines and
describes the substantive elements of a RICO cause of
action. It is Amicus’ contention that any construction

4These cases are collected in the Sedima and Haroco decisions
(passim).

of RICO must begin with the simple differentiation
between the causation requirement set forth in Section
1964(c) and the definition of RICO offenses in Section
1962. This distinction is not only consistent with the
stated goais and purposes of RICO, but will also avoid
the confusion that has been engendered by appellate
court decisions which seek to ascribe some mythology

and magic to the causation requirement contained in
Section 1964(c).

Amicus further disagrees with the contention that a
private civil RICO action requires pleading and proof
that an “integral relationship” exists between the pattern
of racketeering activity and the conduct of the
enterprise’s affairs. Petitioner’s Brief, p.17. The “integral
relationship” contention has not been used in criminal
RICO cases. Since Section 1962(c) is common to both
criminal and civil RICO prosecutions, adoption of the
“integral relationship” test would put at risk prior
criminal RICO convictions. The “integral relationship”
test would also reduce the scope and effectiveness of
RICO by limiting RICO’s application whenever the
central purpose of the enterprise was not wholly
illegitimate.

A. A Person is Injured in his Business or Property
by Reason of a Violation of Section 1962 Whenever
His Injury is Fairly Traceable to the Conduct that
Constitutes the Violation of Section 1962.

Much has been made of the use in Section 1964(c)
of the phrase “injury to business or property by reason
of a violation of Section 1962.” The lower courts have
read the “by reason of” language as requiring anything
from competitive injury to racketeering injury to simple
causation established by reference to the commission

of the underlying predicate acts.°

The issue before this Court is what type of causation
requirement is created by the phrase “by reason of a
violation of Section 1962.” Three positions are being
offered. First, Amicus contends that the natural reading
of that language only requires that the injury to business
or property be fairly traceable to the conduct of the
defendant that constitutes the activity proscribed by
Section 1962.6 Second, Petitioner contends that the “by
reason of” language gives rise to a proximate cause
requirement that in turn requires a showing that there
exists an “integral relationship” between the pattern of
racketeering activity and the conduct of the RICO
enterprise. Third, the Second Circuit in Banker's Trust
Co. v. Rhoades, 741 F.2d 511 (2d Cir. 1984), pet. for
cert. pending, 53 U.S.L.W. 3367 (Oct. 24, 1984)
articulated the requirement that the “by reason of”
language requires a showing that the RICO plaintiff's
injury was caused exclusively by the fact of a violation
of Section 1962; if any of the injury was a consequence
of the conduct leading to a violation of Section 1962,
no private action under RICO is made out.

1. Section 1964(c) Imposes a Simple Cause in
Fact Requirement.

The legal standard to be applied here was been
frequently stated by this Court. “A fundamental canon
of statutory construction is that, unless otherwise
defined, words will be interpreted as taking their

SSee Haroco, Inc. v. American National Bank, 747 F.2d 384,
387-89 (7th Cir. 1984) and Sedima S.P.L.R. v. Imrex Co., Inc.,
741 F.2d 482, 492-94 (2d Cir. 1984) (collecting cases).

‘This Court has frequently used the term “fairly traceable” when
defining the cause in fact requirement. See Duke Power Co. v.
Carolina Environmental Study Group, 438 U.S. 59, 72 (1978)
(standing).

ordinary, contemporary, common meaning.” Perrin v.
United States, 444 U.S. 37, 42 (1979). Construing “by
reason of” is not a Herculean task. There can be little
doubt but that the phrase “by reason of” simply imposes
a traditional cause in fact requirement on a civil RICO
plaintiff.

The phrase “by reason of” is a derivation of the term
“by” and synonymous with that term and such phrases
as “by means of.” See Oxford English Dictionary, p.
1231 (VII In Phrases). The legal interchangeability of
the term “by” and phrases “by reason of” and “by means
of” has been frequently noted. See SA Words & Phrases,
p. 824 (1968). Roget’s Thesaurus identifies “by reason
of” as a preposition whose linguistic idea is paralleled
by such terms as “by the act of”, “through the medium
of”, “by”, “through”. Roget’s International Thesaurus,
p. 429, 656.8 (3d ed. 1962). The phrase “by reason of”
plainly conveys the requirement of a causal link between
the language immediately before it “(injury to business
or property”) with the language immediately after it
(“violation of §1962”). This simple statutory cause in
fact requirement fulfills the statutory purpose of
identifying those persons who have been significantly
affected by the challenged conduct.

The phrase “by reason of” is not generally separately defined
in dictionary texts. The parallel term “by” and the parallel phrase
“by means of” are defined. The term “by,” as used in Section 1962(c)
is a term which when used as a preposition is followed by a word
or phrase naming the causative agent, means, or instrumentality.
Webster's Third New International Dictionary, p. 307; American
Heritage Dictionary of the English Language, p. 182. A similar
definition is provided for the phrase “by means of.” Webster's Third
New International Dictionary, p. 307 (“By means of” is a preposition
which means “through the agency or instrumentality of.”)

2. There Is No Basis For Limiting Civil RICO
Actions To Injuries Resulting Exclusively
From The Fact Of A “Violation” Of Section
1962.

The position that a causal link must exist between
the injury and the fact of “violation” of Section 1962
is addressed in Bankers Trust Co. v. Rhoades, 741 F.2d
511 (2d Cir. 1984), pert. for cert. pending, 53 U.S.L.W.
3367 (Oct. 24, 1984). The essence of the circuit court’s
decision in Bankers Trust Co. is that a civil RICO action
cannot be stated unless the “injury to business or
property” is caused exclusively by the fact of a “violation
of §1962”. Id. at 517.

This Court, in evaluating the “by reason of a violation”
language must recognize that conduct and not the
violation of a statute causes injury. The finding that
a statutory violation has occurred is a legal conclusion
applied to underlying conduct. The conduct not the
violation gives rise to the injury sustained by the plaintiff.
There is no reason to believe that Congress intended
that the causation element require proof of injury
traceable to the abstraction known as a violation of a
statute rather than proof of injury traceable to the
conduct which itself constitutes the violation. As noted
by Justice White last term in Escondido Mutual Water
Company v. La Jolla, —_ U.S. —, 104 S. Ct. 2105, 2110
(1984):

[I]t should be generally assumed that Congress

expresses its purposes through the ordinary
meaning of the words it uses... .

If this Court holds that plaintiff must establish a cause
in fact linkage between the injury to business or property
and the fact of a violation, it would be impossible for
any civil RICO plaintiff to prevail absent the most absurd

and unusual circumstances. For example, where the
claim arises from a staged accident or the claim is wholly
fictitious, the injury to the insurer is direct and results
from investigation or payment, or both, of the claim.
In neither case is it realistic to say that the injury is
the exclusive result of the abstraction known as a
violation of Section 1962(c). Thus, under Banker's Trust
Co., such injuries would not be compensated under civil
RICO because while the injuries are the direct result
of the conduct proscribed by §1962(c), that consideration
is irrelevant under the theory of liability espoused. Under
Banker’s Trust Co., the only potentially qualifying injury
would be if the costs of fraud investigation and payments
lead to an increase in rates, leading to a decrease in
customers, leading to a loss of profits (See examples
noted at 741 F.2d at 517.) To contemplate that Congress
intended civil RICO would reach only such indirect and
remote injuries puts a whole new tilt to the concept
of causation. It can hardly be accepted that Congress
explicitly adopted a private right of action, a right of
action which forms an integral part of the overall attack
on organized criminal activity set forth by Title IX of
the Organized Crime Control Act of 1970, and limited
its reach only to remote injuries attributable to RICO
offenses, such as those described here and in Bankers
Trust Co.

3. Section 1964(c) Does Not Create a Proximate
Or Legal Cause Requirement that Incorpo-
rates Section 1962(c).

Petitioner recognizes the bankruptcy of the argument
sounded in Bankers Trust Co. (see Petitioner’s Brief,
pp. 12-13). It argues that Section 1964(c) creates a
proximate or legal cause requirement satisfied by
petitioner’s construction of §1962(c) that a civil RICO
plaintiff establish that the RICO defendants controlled,
directed or managed the RICO enterprise, or put another

10

way, that the pattern of racketeering activity be integrally
linked with the management and operation of the
enterprise’s affairs.*

The difficulty with this argument is that it converts
the simple cause in fact requirement of Section 1964(c)
into an amorphous and intrusive proximate cause
requirement. The proximate or legal cause concept is
a policy-based concept that operates to impose limits
on the scope of liability short of that which would be
allowed were simple cause in fact the sole criterion. This
point is clearly made by Prosser & Keeton:

The term “proximate cause” is applied by
the courts to those more or less undefined
considerations which limit liability even where
the fact of causation is clearly established.

W. Prosser & W. Page Keeton, The Law of Torts, 273
(Sth ed. 1984).

The proximate cause argument put forward by
petitioner? rests on a strained, unnatural construction

8Petitioner’s Brief, p. 11.

‘The term “proximate cause” was used by the court in Haroco.
Amicus suggests that the result in Haroco was correct and the
court did use a cause in fact approach notwithstanding the use
of the term “proximate cause”:

This holding by no means renders superfluous the
requirement in §1964(c) that the plaintiff be injured “by
reason of” a violation of Section 1962. As we read this
“by reason of” language, it simply imposes a proximate
cause requirement on plaintiffs. The criminal conduct
in violation of Section 1962 must, directly or indirectly,
have injured the plaintiff's business or property. . . . This
causation requirement might not be subtle, elegant or
imaginative, but we believe it is based on a straight-
forward reading of the statute as Congress intended it
to be read.

747 F.2d at 398.

Pi

1]

of the phrase “by reason of.” Section 1962(c) describes
the relationship that must exist between the RICO
defendant(s) and the enterprise. Section 1964(c) confers
standing on persons to sue for covered injuries. The
appropriate construction of Section 1962(c) is not linked
to the issue of causation derived from §1964(c). While
causation is an element of liability, it does not define
liability. This Court should not repeat the mistake noted
by Prosser by transmutting the expressed cause in fact
requirement of §1964(c) into the amorphous legal cause
requirement. W. Prosser & W. Page Keeton. The Lew
of Torts, 272 (Sth ed. 1984).

The suggestion that some ill defined proximate cause
requirement exists as a brooding omnipresence over civil
RICO actions creates the opportunity for much mischief.
The doctrine of proximate or legal cause is sensibly
applied where liability has been created by the common
law process of reasoned elaboration. Courts, having
recognized a right of action, legitimately have a role
in defining the scope and extent of that right. That
argument is not available where, as here, the right of
action is created by Congress. It is Congress’ perogative
to define the scope and extent of the right of action
it has created.!° Lower courts might see this Court’s
acknowledgment that the proximate cause doctrine
exists as an appendage to RICO as providing those lower
courts with a license to engage in a free-wheeling

\lronically, the proximate cause requirement is not generally
considered to be applicable to fraud cases. See W. Prosser & W.
Page Keeton, The Law of Torts, p. 728 (5th ed. 1984) (stating
elements of prima facie case). Since fraudulent conduct permeates
so many of the RICO predicate offenses, inclusion of a proximate
cause requirement suggests a statutory remedy that would be less
advantageous than the common law remedy of fraud. Such a

suggestion is not consistent with this Court's decision in Turkette,
452 U.S. 576, 585 (1982).

12

construction of Section 1962. Seen in this light, the
proximate cause issue adds nothing to the analysis of
a civil RICO cause of action.

B. Section 1962(c) Only Requires That The Conduct
That Constitutes the Predicate Acts Be Related to
the Activities of the RICO Enterprise.

Section 1962 is the core of civil RICO defining the
types of conduct that create liability. Section 1962(c)
requires:

It shall be unlawful for any person employed
by or associated with any enterprise engaged
in, or the activities of which affect, interstate
or foreign commerce, to conduct or participate,
directly or indirectly, in the conduct of such
enterprise’s affairs through a pattern of
racketeering activity or collection of unlawful
debt.

Petitioner asserts that §1962(c) requires a showing of
an “integral relationship between the pattern of
racketeering activity and the conduct of the enterprise’s
affairs... .” Petitioner’s Brief, p. 17. Neither the
language of Section 1962(c) nor the consistent,
overwhelming case law construing Section 1962(c)
support Petitioner’s assertion.'!

'\One circuit court has agreed with the approach suggested by
Petitioner. See Bennett v. Berg, 710 F.2d 1361, 1364 (8th Cir.)
(en banc), cert. denied, 104 S. Ct. 527 (1984). The Bennett decision
is not persuasive. First, it fails to appreciate that its approach is
inconsistent with every circuit court that has considered the scope
of Section 1962(c). Second, the Bennett court's reliance on the panel
decision in United States v. Mandel, 591 F.2d 1347 (4th Cir. 1979)
fails to note that the Fourth Circuit (en banc) ultimately affirmed
the conviction of former Governor Mandel by an equally divided
court. 602 F.2d 653 (4th Cir. 1979). A majority of the Fourth Circuit
members of the en banc court would have affirmed the judgments
of conviction against all contentions, except the jury charge which

13

Section 1962 does not discriminate against particular
types of interaction by “distinguishing between predicate
acts which play a major or a minor role, or any role
at all, in what may be seen as the usual operations of
the enterprise; nor does it require that such acts be in
furtherance of the enterprise... .” United States v.
Stofsky, 409 F.Supp. 609, 613 (S.D.N.Y. 1973), aff‘d,
527 F.2d 237 (2d Cir. 1975), cert. den., 429 U.S. 819
(1976). RICO does not discriminate between near and
remote actors or those merely associated with the
enterprise. See United States v. Elliott, £71 F.2d 880,
903 (Sth Cir.), cert. denied sub nom., Delph v. United
States, 439 U.S. 953 (1978). The RICO net is woven
tightly to trap the smallest fish, even those peripherally
involved with the enterprise.

Indeed, in United States v. Scotto, 641 F.2d 47 (2d
Cir. 1980), (Oakes, J.), cert. denied, 452 U.S. 961 (1981),
the court specifically rejected an “integral relationship”
test. The court noted that Section 1962 “declines to define
in qualitative terms the degree of interrelationship
between the pattern of racketeering and the conduct of
the enterprise’s affairs.” Jd. at 54. Petitioner’s suggested
construction of Section 1962(c) stands in sharp contrast
to the uniform, consistent construction Section 1962(c)
has received in criminal RICO cases.

Concededly, there is breadth to Section 1962(c);
nonetheless, the provision is straightforward: A person
may not conduct or participate, directly or indirectly,
in the conduct of the affairs of the enterprise through
a pattern of racketeering. 18 U.S.C. Section 1962(c).
An “integral relationship” is not compelled by the term
“conduct” or the phrase “participate, directly or
indirectly, in the conduct.” The term “conduct” has a

was the point of equal division. The discussion of Section 1962(c)
in Mandel did not involve the jury charge. 591 F.2d at 1374-75.

14

range of meanings: a strong meaning which includes
the concept of management and direction,'? and a weak
meaning which includes the notion of execution or
carrying out of tasks. Webster’s Third New International
Dictionary, p. 473. This Court should give effect to all
meanings of the term “conduct.”

Section 1962(c) does not use the term “manage” or
“direct” or “control.” Congress thus eschewed more
specific terms in favor of a generalized term that
encompasses a range of meanings. There is no basis for
this Court transforming Congress’ general term into the
limited term petitioner espouses. This Court shouid
follow the policy adopted in its previous RICO decisions
in Turkette (452 U.S. 576 (1981) and Russello (104 S.
Ct. 296 (1983)) of giving RICO terms the broad
construction to which they are susceptible, rather than
picking out, from the range of meanings, a narrow,
restrictive construction.

Even if Congress intended that RICO would be
primarily directed toward situations where there was an
“integral relationship” between the racketeering activity
and the enterprise, it is not a proper judicial function
to limit the plain language of a statute to only that
primary activity. See U.S. v. Elliott, 571 F.2d 880, 897
n.17 (Sth Cir. 1978). A comprehensive statute should
not be gelded under the guise of construction. United
States v. Raynor, 302 U.S. 540, 552 (1938) (no rule of
construction requires that statute be given the “narrowest
meaning”).

First, a general rule of stautory construction is to
interpret the whole statute and not just the particular
word or phrase under scrutiny. 2A Sutherland Statutory

'2Petitioner relies on these strong meanings of the word control
to support its contention that there must be an “integral
relationship” between the racketeering activity and the enterprise.
Petitioner's Brief, p. 17.

15

Construction, Section 46.05, p. 90 (4th ed.) In this regard,
attention should be directed to the language in §1962(c)
that extends liability to those who “participate, directly
or indirectly, in the conduct. . . .” The term “participate”
suggests that the term “conduct” should not be limited
to a strong meaning for “participate” suggests “sharing,”
not control. Webster’s Third New International
Dictionary, p. 1646. Congress’ adoption of a generalized
or weak sense of the term “conduct” is also suggested
by the qualifiers to the term “participate.” To state that
a person may participate, “directly or indirectly,” in the
conduct of the enterprise suggest a level of involvement
not necessarily requiring management or control or
direction of the enterprise.

The use of the term “through” in Section 1962(c) does
not, as petitioner’s claim, support the argument that the
term “conduct” is used exclusively for its strong meaning.
Petitioner’s Brief, p. 17. As construed by petitioner, the
terms “conduct” and “through” become duplicative and
redundant. If the term “conduct” is used in its strong
sense, there is no need for the term “through” as that
latter term is construed by petitioner. When the terms
“conduct” and “through” are used in their more
customary, general sense, a more natural reading of
Section 1962(c) appears. Under this reading, the term
“through” is given its normal meaning as a causal term
rather than a qualitative term. See United States v.
Nerone, 563 F.2d 836, 851 (7th Cir. 1977), cert. denied
sub nom. Helfer v. United States, 435 U.S. 951 (1978);
Webster’s Third New International Dictionary, p. 2384
(1 through). This functional meaning is particularly
called for where, as in Section 1962(c), the term
“through” is used as a preposition, whereas, the meaning
urged by petitioner is more appropriate where the term
through is used as an adverb. Weoster’s Third New
International Dictionary, p. 2384 (2 through).

16

Second, the consistent judicial interpretation of
Section 1962(c) does nut support limiting the term
“conduct” to the strong meaning urged by petitioner.
United States v. Scotto, 641 F.2d 47 (2d Cir. 1980)
(Oakes, Jr.), cert. denied, 452 U.S. 961 (1981) (one
“conducts” for purposes of Section 1962(c) when the
predicate offenses are related to the activities of the
enterprise.)!3

Third, the breadth Amicus ascribes to the term
“conduct” is more consistent with the overall statutory
scheme. Section 1962 defines that conduct which
determines whether there is substantive liability under
the statute. This liability provision is common to both
criminal and civil prosecutions. Requiring proof of an
“integral relationship” would engender confusion and
complexity in RICO prosecutions by deflecting attention
away from how the enterprise was operated or
manipulated to facilitate racketeering activity toward an
inquiry into the structure of the enterprise. RICO
prosecutions would be dependent on demonstrating that
the RICO defendants had the power, formal or informal,
to manage, direct or control the enterprise to accomplish
the racketeering activity. Such a construction would not
only run counter to the intent of Congress that RICO
punish behavior not status (see 116 Cong. Rec., part
26, Oct. 7, 1970, p. 35344 (Remarks of Mr. Poff); United
States v. Mandell, 415 F. Supp. 997, 1018-19 (D. Md.
1976), aff'd by equally divided Court 602 F.2d 653 (4th
Cir. 1979), cert. denied, 445 U.S. 961 (1980)) but also

'3Even the Fifth Circuit which had a slightly different standard
for demonstrating the requisite nexus does not come close to the
rigor demanded by petitioner. See United States v. Cauble, 706
F.2d 1322, 1333, 1343 (Sth Cir. 1983), cert. denied, 104 S. Ct. 996
(1984) (RICO defendant's position in enterprise must facilitate his
commission of the racketeering acts and the enterprise must be
affected by the racketeering activity).

17

invite RICO participants to create enterprises of
byzantine complexity to frustrate and avoid prosecution.
Such a construction is not consistent with the
acknowledged goals and purposes of RICO “to divest
the association of the fruits of its ill-gotten gains. United
States v. Turkette, 452 U.S. 576, 585 (1980).

Adoption of an “integral relationship” requirement
would enable persons who heretofore had been subject
to RICO to escape liability. Thus, the union official
or public officer who uses his office to facilitate
racketeering activity has to date been subject to RICO
(see, e.g., United States v. Provenzano, 688 F.2d 194,
199-200 (3d Cir.), cert. denied, 459 U.S. 1071 (1982)
(union official); United States v. Forsythe, 560 F.2d 1127,
1135-37 (3d ed Cir. 1977) (public officers)), but could
escape liability under petitioner’s construction since the
racketeering activity was not “integral” to the union or
government office. Similarly, in insurance fraud cases
that are of concern to Amicus, an “integral relationship”
requirement might insulate from liability participants
in the scheme who derive a portion of their income from
the racketeering activity, but who otherwise carry on
a legitimate practice. These participants might not
engage in racketeering activity that is “integral” to the
enterprise. In large scale insurance fraud rings many
of the participants may be remote, though repeat actors,
who could not be said to have a management or
controlling role. Under petitioner’s construction, these
persons would profit from their participation in the
racketeering activity, but might escape liability under
RICO. Petitioner’s construction would resurrect the
same end this Court declared “unacceptable” in
Turkette: “Whole areas of “organized criminal activity”
would be placed beyond the substantive reach of

18

[RICO].” 452 U.S. at 589. This Court’s comments in
Turkette are particularly important for they emphasize
that it is organized criminal activity, not just “organized
crime” of the popular stereotype, that is the object of
RICO. United States v. Turkette, 452 U.S. 576, 591
(1981). It is the person’s affiliation with the enterprise,
like a person’s involvement in a conspiracy, that raises
the greater concern resulting in RICO’s sanction. This
Court should no more require “integral” involvement
in the RICO enterprise that it would require “integral”
involvement in a conspiracy.

CONCLUSION

It must be borne in mind that the critical issue
addressed by the Seventh Circuit in Haroco is that of
~ causation in fact. It is respectfully submitted by Amicus
that on that issue the Seventh Circuit ruled correctly—
a plaintiff need only show under Section 1964(c) a cause
in fact link between injury to his business or property
and the conduct that constitutes a violation of Section
1962. It is unnecessary and unwise to confuse this simple
issue of cause in fact with the policy issues necessarily
implicit in the concept of proximate cause.

it still remains the obligation of every civil RICO
plaintiff asserting that a violation of Section 1962(c) has
occurred to demonstrate by the requisite burden of proof
the correctness of that position. The construction of
Section 1962(c) argued for by petitioner, however, is
not a correct construction of that provision. Section
1962(c) only requires that the predicate offenses relate
to the activities of the enterprise. Any other construction
is not only inconsistent with the plain meaning of Section
1962(c), but would jeopardize each criminal conviction

19

that has previously been secured under the existing
construction of Section 1962(c).

Respectfully submitted,

JAMES M. FISCHER
Counsel of Record

PATRICK MESISCA, JR.
GILBERT, KELLY, CROWLEY & JENNETT

Attorneys for Amicus Curiae
INTERINSURANCE EXCHANGE OF THE
AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA
515 South Figueroa Street, Suite 1600
Los Angeles, California 90071
(213) 622-5200

PROOF OF SERVICE BY MAIL
State of California
SS.
County of Los Angeles

I, the undersigned, say: I am and was at all times herein
mentioned, a citizen of the United States and a resident of the
County of Los Angeles, over the age of eighteen (18) years and
not a party to the within action or proceeding; that my business
address is 11333 lowa Avenue, Los Angeles, California 90025;
that on March 27, 1985, I served the within Motion for Leave
to File a Brief as Amicus Curiae and Brief Amicus in said action
or proceeding by depositing true copies thereof, enclosed in a
sealed envelope with postage thereon fully prepaid, in the United
States mail at Los Angeles, California, addressed as follows:

Clerk, United States Supreme Court Petitioner American National Bank
| First Street, N.E. & Trust Company
Washington, D.C. 20543 Counsel of Record: Donald E. Egan
(Original and 40 copies) Katten, Muchin, Zafis, Pearl

& Galler

55 East Monroe Street
Chicago, Illinois 60603

Respondent Haroco, Inc.

Counsel of Record: Aram Hartunian
Hartunian, Futterman & Howard, Chtd.
Suite 4005

55 East Monroe Street

Chicago, Illinois 60603

I declare under penalty of perjury that the foregoing is true
and correct. Executed on March 27, 1985, at Los Angeles,
California.

Joy Rivelli Miller
(Original signed)

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0144%3A08. Public record. Not legal advice.