Amicus Curiae Brief — Sedima, S. P. R. L. v. Imrex Co.

Nos. s4-688 sesed”) ae tok US

FILE

IN THE FEB 36 1985

Supreme Cont of the United cn v STEVAS.

A

October Term, 1984 —_ CLERK es

No. 84-648

SEDIMA, S.P.R.L.,

Petitioner,

v.

IMREX COMPANY, INC., et al.,

Respondent.

On Writ of Certiorari to the United States Court of

Appeals for the Second Circuit

No. 84-822

AMERICAN NATIONAL BANK AND TRUST CO.

OF CHICAGO, et al.,

Petitioner,

v.

HAROCO, INC., et al.,

Respondent.

On Writ of Certiorari to the United States Court of

Appeals for the Seventh Circuit

——

—__—_—— ----

BRIEF OF AMICUS CURIAE

COUNTY OF SUFFOLK, NEW YORK

— — --— ———__—_——— —-

a ——_———— a

MARTIN BRADLEY ASHARE

Suffolk County Attorney

H. Lee Dennison Building

Veterans Memorial Highway

Hauppauge, New York 11788

(516) 548-3500

Mark D. CoHEN

LAURENCE La POINTE

James J. O’RourKE

Special Assistant County Attorneys

Of Counsel

TABLE OF CONTENTS

PAGE

Interest of Amicus devas 1

Summary of Argument 2

Argument—The remedial provisions of civil RICO

i18 U.S.C. 1964(c)] should be liberally construed

to reject a requirement of proof of a prior convic-

tion and so-called ‘‘racketeering injury’’ as a

prerequisite to suit

Gs

A. The Previous Conviction Requirement 3

B. The ‘‘Racketeering Injury’’ Requirement 10

Conclusion 13

If

TABLE OF AUTHORITIES

PAGE

Cases:

Alcorn County v. United States Interstate Supplies,

Inc., 731 F.2d 1160 (Sth Cir. 1984). ........ 8

Alexander Grant and Co. v. Tiffany Industries, Ine.,

742 F.2d 408 (Sth Cir. 1984) err... 7

Bankers Trust v. Rhoades, 741 F.2d 511 (2d Cir.

||) EMU 10, 11, 12

Bennett v. Berg, 685 F. 2d 1053 (Sth Cir. 1982), aff’d,

710 F.2d 1361 (Sth Cir. 1983) (en bane) . 17, 9, 12

Bennett v. E. F. Hutton Co., Ine., 597 F.Supp. 1547

(D.N.Ohio 1984) 7

Bunker Ramo Corp. v. United Business Forms, Inc.,

713 F.2d 1272 (7th Cir. 1982) ieee 6

City of New York v. Arnmart Wholesale Beer Distrib-

utors, Inc., 83 Civ. 9263 (S.D.N.Y. 1983) ............. ; 8

City of New York v. Bandolene Fuels, Inc., 81 Civ.

1340 (B.D.N.X. IGE) .............0ee 8

City of Milwaukee v. Hansen, Civ. No. ‘17- 246 (ELD.

aa \ <

County of Cook v. Lynch, 560 F. Supp. 136 (N.D.I.

) |: ) &

County of Cook v. Mideon Corp. 574 F.Supp. 902

O, AN RB ) 8

County of Suffolk v. Tempera, et al., 82 Civ. 2194

(E.D.N.Y.; filed July 26, 1982) ............000000 1

County of Suffolk v. Estate of Walsh, et al., 81 Civ.

257 (E.D.N.Y.; filed January 27, 1981) (filed sub

nom., County of Suffolk v. Walsh, et al.) 1,8

Farmers Bank of State of Delaware v. Bell Mortgage

Corp., 452 F.Supp. 1278 (D.C.Del. 1978) 6

Flora v. United States, 357 U.S. 63 (1958) 000... 4

Furman v. Cirrito, 741 F.2d 524 (2d Cir. 1984), appli-

cation for cert pending, No. 84-604 0... 9, 10

Iil

PAGE

Gerace v. Utica Veal Co., 580 F.Supp. 1465 (N.D.N.Y.)

1984) | | | | 8

Haroco, Ine. v. American National Bank and Trust Co.

of Chicago, 747 F.2d 384 (7th Cir. 1984), cert.

granted, US. (1985) (No. 84-822). 2, 3, 11, 12

Matter of District Attorney of Suffolk County, 58

N.Y.2d 436 (1983) | ye accascssvenssosess> 8

Maryland v. Buzz Berg Wrecking Co., 496 F. Supp.

245 (D.Md. 1980) . 8

Moss v. Morgan Stanley, Inc., 719 F.2d 5 (Qa Cir.

1983), cert. denied sub nom., Moss v. Newman,

— US. ——, 104 S.Ct. 1280 (1984) ; 6

Municipality of Anchorage v. Hitachi Cable, Ltd., 547

F.Supp. 633 (D.Alaska 1982) . | 8

Owl Construction Co., Ine. v. Ronald Adams Con-

tractor, Inec., 727 F.2d 540 (Sth Cir. 1984) | 7

People v. Tempera, 94 A.D.2d 987 (2d Dep’t 1983) 7,8

Reiter v. Sonotone Corp., 442 U.S. 330 (1979) ............ 5

Russell v. United States, ——- U.S. —-, 104 S.Ct.

| aa 3

Schacht v. Brown, 711 F.2d 1343 (7th Cir), cert. de-

nied, —— U.S. ——, 104 S.Ct. 508 (1983)... 9

Sedima, 8.P.R.L. v. Imrex Co., Inc., 741 F.2d 482 (2d

Cir. 1984), cert. granted, ——- U.S. —— (1985)

Cee no ssscccucssenevecesacencceseeees passim

State Farm Fire & Cas. Co. v. Caton, 540 F. Supp. 673,

(N.D.Ind. 1982) . 4

State of New York v. O’Hara, 595 F. F.Supp. 1101 ( Ww. D.

N.Y. 1984) . Seitbicees sass Ee 8

USACO Coal Co. v. Carbomin Energy, Inc., 689 F.2d

Nee cnn. cccacessuccececsecsensercaseeseee, 6, 7

United States v. Borden Co., 347 U.S. 514 (1954) _.. 5

IV

PAGE

United States v. Cappetta, 502 F.2d 1351 (7th Cir.

1974), cert. denied, 420 U.S. 925 (1975) 5

United States v. Frumento, 563 F.2d 1083 (3d Cir.

1977), cert. denied, 484 U.S. 1072 (1978) 4

United States v. Parness, 503 F.2d 480 (2d Cir. 1974),

cert. denied, 419 U.S. 1105 (1975) = 5

United States v. Sells Engineering, Inc., —— US.

, 103 S.Ct. 3133 (1983) . ER eae Cee 8

United States v. Turkette, 452 U.S. 576, 586- 587 (1981) 3,4

United States v. Walsh, 700 F.2d 846 (2d Cir.), cert.

denied, US. , 104 S.Ct. 984 (1983) ..... | 7

Waste Recovery Corp. v. Mahler, 566 F.Supp. 1466,

(S.D.N.Y. 1983) . ae

Williamette Savings & Leas Vv. Blake & N eal Finance

Co., 577 F.Supp. 1415 (D.Ore. 1984) : 11

Other Authorities:

Blakey, The Civil RICO Fraud Action in Context:

Reflection on Bennett v. Berg, 58 Notre Dame

L.Rev. 237, 249-250 (1982) 2.000000. 7

Blakey & Gettings, Racketeer Influenced and Corrupt

Organizations (RICO): Basic Concepts, Crim-

imal and Civil Remedies, 53 seit L.Rev. 1009,

1014-1015 (1980)

McClellan, The Organized Crime Control Act ( 8. 30)

or Its Critics: Which Threatens Civil Liberities?,

46 Notre Dame L.Rev. 55 (1970) ...........

Note, Civil RICO: The Temptation and Impropriety

of Judicial Restrictions, 95 Harv.L.Rey. 1101,

1118-1121 (1982) ................. 9

Shaw, Use of RICO’s Civil Remedies by State, Local

Governments, New York Law Journal, June 14,

1982 at pp. 1 and 3 | Bee PINON ea EN ITER ONCE A 8,9

Strafer, Massimi and Skolnick, Civil RICO in the

Public Interest: ‘*‘Everybody’s Darling’’, 19

American Criminal L.Rev. 655 (1982) .............. 9

~

~]

Interest of Amicus*

In recent years, governments on all levels—federal,

state and local—have increasingly recognized the remedial

value of civil sanctions to combat pervasive fraud com-

mitted against the public. No longer satisfied with the

mere imposition of criminal penalties against wrong-doers,

municipal entities are now seeking to return the ill-gotten

gains of those who corrupt our institutions to the public

treasury. Toward that end, Amicus, County of Suffolk,

has initiated two civil lawsuits pursuant to, im 2r alia, the

Racketeer Influenced and Corrupt Organizations Act of the

Organized Crime Control Act of 1970 (RICO) [18 U.S.C.

1961, et seq.]. In County of Suffolk v. Estate of Walsh,

et al., 81 Civ. 257 (E.D.N.Y.; filed January 27, 1981) [filed

sub nom., County of Suffolk v. Walsh, et al.|, Amicus

sought damages and recision of certain engineering and

construction contracts in a 260 million dollar fraud action

which was based on a pattern of corruption and kickbacks

in the planning and construction of a billion dollar public

works project known as the Suffolk County Southwest

Sewer District. Similarly, in County of Suffolk v. Tempera,

et al., 82 Civ. 2194 (E.D.N.Y.; filed July 26, 1982), Amicus

sought approximately four million dollars in damages and

recision of certain educational and training contracts as

well as recision of certain salary monies paid to a local gov-

ernment official in connection with a pattern of bribery and

kickbacks in the award and execution of public contracts

funded by the United States Department of Labor.

In these cases, Suffolk County, a municipal corporation

and political subdivision of the State of New York, located

on the eastern two-thirds of Long Island, New York, with a

* The filing of this brief is pursuant to Rule 36(4) of the Court.

2

population of approximately 1.4 million persons, has at-

tempted to both relieve the financial burden on taxpayers

and in its own behalf and as fiduciary for the United States

of America, recoup monies illegally obtained by the wrong-

ful conduct alieged in these suites.

The broad policy question presented in both cases on

review herein is the scope and application of the civil RICO

statute. As we outline in our argument, the majority opin-

ion in Sedima, S.P.R.L. v. Imrex Co., Inc., 741 F.2d 482

(2d Cir. 1984), cert. granted, U.S. —— (1985) (No.

84-648), has, with virtually no statutory or case law prece-

dent, improvidently narrowed the intended reach of RICO

by engrafting a prior conviction prerequisite to civil suit

under the statute. This decision constitutes an unwar-

ranted restriction on the ability of local and state govern-

ment to recoup illegally obtained taxpayers’ money. Ad-

ditionally, the Sedima majority’s engrafting of a so-called

‘‘racketeering injury’’ as an element which the prospective

civil RICO plaintiff must prove was an inappropriate en-

actment of judicial legislation which was correctly rejected

in Sedima’s companion case, before the Court, Harco, Inc.

v. American National Bank and Trust Co. of Chicago, 747

F.2d 384 (7th Cir. 1984), cert. granted, —— U.S. ——

(1985) (No. 84-822).

Summary of Argument

The scope and purpose of the provisions of RICO and

in particular, its civil provisions, 18 U.S.C. 1964(c) is

clear—to strip those who engage in racketeering activity

of their ill-gotten fruits and thus, provide a remedy to

ad

0

those innocent parties harmed by such illicit conduct. See,

United States v. Turkette, 452 U.S. 576, 586-587 (1981);

see also, Russello v. United States, —— US. . -

—, 104 S.Ct. 296, 302-303 (1983). Notwithstanding the

majority’s holding in Sedima, S.P.R.L. v. Imrex Co., Inc.,

No. 84-648, the legislative history and developing case law

under this provision demonstrate no requirement of a prior

criminal conviction as a prerequisite to suit. Similarly,

any judicial attempt to legislate a requirement that plain-

tiffs in such suit prove a ‘‘racketeering injury’’ as an ele-

ment of proof precedent to recovery should be rejected.

Compare, Haroco, Inc. v. American National Bank and

Trust Co. of Chicago, No. 84-648 with Sedima, supra.

ARGUMENT

The remedial provisions of civil RICO [18 U.S.C.

1964(c)] should be liberally construed to reject a re-

quirement of proof of a prior conviction and so-called

“racketeering injury” as a prerequisite to suit.

A. The Previous Conviction Requirement

The remedy provided in 18 U.S.C. 1964(c) must, of

course, be viewed in light of the statute’s legislative history

and case law construction. On this basis, Amicus urges a

previous criminal conviction plainly is not a prerequisite to

suit under RICO.

18 U.S.C. §1964(¢c) provides:

‘Any person injured in his business or property by

reason of a violation of section 1962 of this chapter

may sue therefor in any appropriate United States

district court and shall recover threefold the damages

4

he sustains and the cost for the suit, including a rea-

sonable attorney’s fee.’’ (emphasis added).

Analyzing RICO’s ‘‘language’’ [United States v. Tur-

kette, 452 U.S. 576, 580 (1981)] and ‘‘literal meaning of

the words employed,’’ [Flora v. United States, 357 U.S. 63,

65 (1958) ], Section 1964(c) refers to a ‘‘violation’’ of the

standards of Section 1962, and not to the criminal penalties

of Section 1963. Sectic.: 1963 states that acts in violation

of it are ‘‘unlawful,’’ not criminal.' Criminal and civil

sanctions are supplied to violations of Section 1962 by Sec-

tion 1963 (criminal) and Section 1964 (civil).

Accordingly, Amicus respectfully maintains that any

construction of RICO which requires a prior ‘‘RICO con-

viction’’ as defined in 18 U.S.C. 1962 is an incorrect nar-

rowing of the statute’s scope and purpose. Simply stated,

there is no reason to ‘‘depart ... from and limit... the stat-

utory language.’’ United States v. Turkette, 452 U.S. 576,

981 (1981) (apropos of scope of ‘‘enterprise’’). Thus, the

broad construction suggested by petitioner Sedima with

respect to the prior conviction question ‘‘is neither absurd

nor surprising.’’ ZJd. at 537.*

1. Contrary to the Sedima majority's inference [741 F.2d at

501-502] civil RICO is not a criminal statute in any sense. It does

not make criminal, conduct that before its enactment was innocent,

since its application depends on the existence of “racketeering activ-

ity” that violates an independent criminal statute. Its standards of

“unlawful” conduct are in fact sanctioned by criminal and civil rem-

edies. RICO is, in short, a “remedial” statute. 84 Stat. 947 (1970)

(“remedial purposes” warrant “liberal” construction). See, United

States v. Frumento, 563 F.2d 1083, 1090-1091 (3d Cir. 1977), cert.

denied, 434 U.S. 1072 (1978); see also, e.g., State Farm Fire &

Cas. Co. v. Caton, 540 F.Supp. 673, 675 (N.D.Ind. 1982).

2. Indeed, any other construction of Section 1964 flies, not only

i nthe face of the liberal construction directive noted supra at fn. 1,

but also RICO’s explicit statement of findings and purpose. 84 Stat.

(footnote continued on next page)

0

Congress intended that civil litigants (‘‘persons’’) be

given a cause of action for relief in cases in which a defend-

ant, through an ‘‘indictable’’ or ‘‘chargeable’’ ‘‘pattern of

racketeering’’ [18 U.S.C. 1961(1)(a) and (b) (emphasis

supplied) ] had caused injury to a plaintiff. Simply stated,

these words ‘‘mean just what they say’’ [Sedima, 741 F.2d

at 504 (Cardimone, J. dissenting) | ; there is no requirement

that either a United States Attorney or a state » ‘osecutor

have obtained a conviction as a threshold requirement to

suit under this statute.

Thus, the narrow holding of Sedima would, at the

very least, be wholly inconsistent with the case law as it

has developed since RICO’s enactment in 1970. For ex-

ample, in United States v. Cappetto, 502 F.2d 1351 (7th Cir.

1974), cert. denied, 420 U.S. 925 (1975), one of the first re-

ported civil RICO cases, the Government began an injunc-

tive action against the defendant under Section 1964 (a)

and (b). Section 1964(a) grants equity jurisdiction to fed-

eral courts to prevent and restrain ‘‘violations of Section

1962.’’ The Government in Section 1964(b) is explicitly

922-23 (“illegal use of . . . fraud” “enhanced sanctions and new rem-

edies”). Thus, if this Court accepts such a construction on Section

1964 cases, the class of injured persons entitled to sue even outside

those in the publi¢ sector as noted, infra, would be sharply curtailed.

In following the antitrust model by providing a cause of action for

injured persons, Congress “created . . . the civil suit under Section

. .. [1964] precisely for the purpose of encouraging private challenges

to violation.” Reiter v. Sonotone Corp., 442 U.S. 330, 344 (1979)

(emphasis in original) (apropos of section 4 of the Clayton Act).

“Private suits” were thought to “provide a significant supplement to

the limited resources available to the Department of Justice .. .”

(emphasis added). Jd. See, United States v. Borden Co., 347 U.S.

514, 518 (1954) (private suits under section 4 “designated to be

cumulative, not mutually exclusive’) (emphasis added). A narrow

construction of Section 1964 would undermine those “salutary pur-

poses.” United States v. Parness, 503 F.2d 430, 439 (2d Cir. 1974),

cert. denied, 419 U.S. 1105 (1975) (apropos of “‘enterprise’’).

6

authorized to ‘‘institute proceedings’’ under Section 1964

(a). No prior criminal conviction had been obtained.

The court observed :

‘‘TA]ets which may be prohibited by Congress may be

made the subject of both criminal and civil proceed-

ings, and the prosecuting arm of the government may

be authorized to elect whether to bring a civil or crim-

inal action, or both. A civil proceeding to enforce those

acts is not rendered criminal in character by the fact

that the acts are also punishable as crimes... The

relief authorized by .. . [Section 1964].’’ 502 F.2d at

1357.

Similarly, in Farmers Bank of State of Delaware v. Bell

Mortgage, Corp., 452 F.Supp. 1278 (D.C.Del. 1978), a pri-

vate civil damage action was brought under Section 1964.

The defendant objected that he had ‘‘not [been] con-

victed ...’? 452 F.Supp. at 1279. The court held:

‘*Section 1964(c) ... does not condition ... [a] cause of

action in any way upon a previous conviction under the

criminal provisions of the statute. It is only necessary

that the plaintiff provide elements of the Act by a

preponderance of the evidence in order to be awarded

damages in a civil action.’’ 452 F.Supp. at 1280.

Interestingly enough, prior to Sedima, the Second Cir-

cuit at least in dicta held that eriminal convictions were

not necessary [Moss v. Morgan Stanley, Inc., 719 F.2d 5,

19, fn. 15 (2d Cir. 1983), cert. denied, sub nom., Moss v.

Newman, —— U.S. ——, 104 S.Ct. 1280 (1984)], which

determination was specifically reached as holding in the

Sixth and Seventh Circuits. Bunker Ramo Corp. v. United

Business Forms, Inc., 713 F.2d 1272, 1287 (7th Cir. 1983),

USACO Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94,

7

95 fn. 1 (6th Cir. 1982) ; see also, Bennett v. Berg, 685 F.2d

1053, 1063-1064 (8th Cir. 1982), aff’d 710 F.2d 1361 (8th

Cir. 1983) (en banc) ; Owl Construction Co., Inc. v. Ronald

Adams Contractor, Inc., 727 F.2d 540, 542 (5th Cir. 1984) ;

ef., Alexander Grant and Co. v. Tiffany Industries, Inc.,

742 F.2d 408, 413, fn. 11 (8th Cir. 1984) (issue not reached).

Indeed, the Sedima majority conceded that virtually every

prior case to have definitively ruled on the question held

that a previous criminal ‘‘RICO”’ conviction was not neces-

sary as a pre-condition to the filing of an efficacious civil

RICO suit. Sedima, 741 F.2d at 496-498 and cases cited

at fns. 42-43; see also, Cardimone, J., dissenting in Sedima

at 504-505) ; see also, Bennett v. FE. F. Hutton Co., Inc., 597

F.Supp. 1547, 1556-1558 (N.D.Ohio 1984) (rejecting

Sedima).

The Sedima majority’s announcement of the previous

conviction requirement would seem to have been based, at

least in part, on a reaction to a perceived flood of so-called

‘‘garden variety’’ civil-RICO lawsuits [see, Sedima, 741

F.2d at 408, 503]. We suggest that such a theory inappro-

priately serves to judicially repeal civil RICO in many

cases contrary to strong Congressional intent® and thus,

in essence ‘‘throw the baby out with the bathwater.’”

3. See analysis of civil RICO’s legislative history contained in

McClellan, The Organized Crime Control Act (S.30) or its Critics:

Which Threatens Civil Liberties?, 46 Notre Dame L.Rev. 55 (1970) ;

Blakey & Gettings, Racketeer Influenced and Corrupt Organizations

(RICO): Basic Concepts, Criminal and Civil Remedies, 53 Temple

L.Rev. 1009, 1014-1015 (1980); see also, Blakey, The Civil RICO

Fraud Action in Context: Reflections on Bennett v. Berg, 58 Notre

Dame L.Rev. 237, 249-250 (1982).

4. We note that there, in fact, are predicate criminal convictions

underlying the racketeering activity complained of in both civil RICO

cases filed by the Amicus Suffolk County in the civil RICO cases it

is a party litigant [United States v. Walsh, 700 F.2d 846 (2d Cir.),

cert. denied, —— U.S. ——, 104 S.Ct. 984 (1983); and People v.

(footnote continued on next page)

8

Amicus, along with various other municipalities and

state governments, suing as ‘‘persons’’ under 18 U.S.C.

1964(c), has sought to utilize the civil RICO’s provisions in

the civil forum for the public interest [see e.g., United

States v. Sells Engineering, Inc., US. _- , 103

S.Ct. 3133, 3161-3162 (1983), (Burger, C.J., dissenting) ;

Matter of District Attorney of Suffolk County, 58 N.Y.2d

436, 445 (1983)] to recover ill-gotten monies to the tax-

payers and thus strip violators of the fruits of their crim-

inal activities. See, e.g., Alcorn County v. United States

Interstate Supplies, Inc., 731 F.2d 1160 (5th Cir. 1984) ;

State of New York v. O’Hara, 595 F.Supp. 1101 (W.D.N.Y.

1984) ; Gerace v. Utica Veal Co., 580 F.Supp. 1465 (N.D.N.Y.

1984) ; County of Cook v. Midcon Corp., 574 F.Supp. 902

(N.D.II1. 1983); County of Cook v. Lynch, 560 F.Supp. 136

(N.D.ILL. 1982) ; Municipality of Anchorage v. Hitachi Cable,

Ltd., 547 F.Supp. 633 (D.Alaska 1982); Maryland v. Buzz

Berg Wrecking Co., 496 F.Supp. 245 (D.Md. 1980); City

of New York v. Arnmart Wholesale Beer Distributors, Inc.,

83 Civ. 9263 (S.D.N.Y. 1983) ; City of New York v. Bando-

lene Fuels, Inc., 81 Civ. 1240 (E.D.N.Y. 1981) ; City of Mil-

waukee v. Hansen, Civ. No. 77-246 (E.D.Wisc. 1981); see

also, Shaw, Use of RICO’s Civil Remedies by State, Local

Tempera, 94 A.D.2d 987 (2d Dep’t 1983)]. Nonetheless, in County

of Suffolk v. Estate of Walsh, supra, the District Court has stayed

all proceedings pending the resolution of the cases, sub judice in this

Court. However, “limit|ing] private RICO” because there are no

“prosecutorial guidelines” as in criminal RICO [Sedima, supra at

497], should not be a function of our appellate courts when Congress

has clearly spoken to the contrary. Such a restriction with absolutely

no guidance as to its ultimate scope [see, Sedima, supra at 503],

would, with virtually no precedent, precondition all civil RICO suits,

on prosecutorial discretion. This in turn is a function of a commit-

ment of limited resources in cases where a government’s priorities and

responsibilities may necessarily differ in either the criminal or civil

forum.

9

Governments, New York Law Journal, June 14, 1982 at pp.

1 and 3.

Thus, while we are certainly not persuaded that in at

least public sector litigation, as one court has noted in gen-

eral, RICO has ‘‘created a runaway treble damage bonanza

for the already excessively litigious’’ [Schacht v. Brown,

711 F.2d 13438, 13861 (7th Cir.), cert. denied, —— U.S. .

104 S.Ct. 508 (1983) ; see also, Sedima, supra, at 786], where

Congress has spoken in ‘‘clear and unambiguous terms’’ on

the matter [cf., Furman v. Cirrito, 741 F.2d 524, 532 (2d

Cir. 1984), application for cert. pending, No. 84-604], stat-

utory enactment by bald judicial fiat to narrow civil RICO

on this question is plainly inappropriate.

As Judge Cardimone [dissenting in Sedima, 741 F.2d at

505) succinctly observed, ‘‘the simple explanation for [the]

resounding rejection of any prior conviction requirement,’’

{in all previous cases] is that ‘‘it does not appear in the

statute’’ (emphasis supplied).

It is for this reason, we respectfully maintain, that

only days after Sedima, a different Second Circuit panel

suggested that Sedima had improvidently and without au-

thority, restricted the plain meaning and intent of civil

RICO as enacted by Congress. Furman v. Cirrito, 741 F.2d

at 531-532; see, Note, Civil RICO: The Temptation and Im-

propriety of Judicial Restrictions, 95 Harv.L.Rev. 1101,

1118-1121 (1982); Strafer, Massimi and Skolnick, Civil

RICO in the Public Interest: ‘‘Everybody’s Darling’’, 19

American Criminal L.Rev. 655 (1982) ; see also, Bennett v.

Berg, 685 F.2d at 1064 [‘‘it is beyond our authority to re-

strict the reach of the statute’’].

10

B. The “Racketeering Injury” Requirement

The ‘‘racketeering injury’’ requirement promulgated

in Sedima similarly has no basis in the language of the

statute or in its legislative history. Further, this require-

ment, especially as interpreted by the Second Circuit in the

companion ease of Bankers Trust v. Rhoades, 741 F.2d 511

(2d Cir. 1984) [application for cert. pending No. 84-657],

would have a negative impact on future civil RICO ae-

tions,® simply because this standing requirement is inca-

pable of any meaningful definition which does not re-intro-

duce the discredited organized crime nexus requirement

through the back door.

While the Sedima court suggested that the language of

§1964(c) is ambiguous, and therefore, open to judicial in-

terpretation [741 F.2d at 486-488], another Second Circut

panel only two days later in Furman v. Cirrito, 741 F.2d

524 (2d Cir. 1984), found that it was not:

“To us the language of §1964(c) is clear. It contains

no requirement for a ‘racketeering enterprise injury ;’

nor does it limit the protected injury to one sustained

‘by reason of’ the racketeering enterprise; it grants

civil relief for ‘injury,’ which logically includes any

injury, ‘by reason of a violation of §1962.’’’ 741 F.2d

at 528.

Indeed, as we have previously argued, it is clear that the

Sedima court based its finding of §1964(c)’s ambiguity on

nothing more than it’s own judicial unhappiness with the

5. We note that in both actions filed by Amicus County of Suf-

folk, long before Sedima, injury due to racketeering activities of the

nature suggested in that case was in fact pleaded. However, aside

from whether or not civil RICO should properly have such a stand-

ing rule, as discussed infra, Sedima has outlined no criteria for eval-

uating such a requirement.

11

impact of the statute, as written, upon alleged fraud involv-

ing ‘‘respected and legitimate enterprises.’’ 741 F.2d

at 487.

With respect to the legislative history of civil RICO

concerning this issue, the Sedima court suggested that there

is nothing but ‘‘clanging silence.’’ But see, Amicus’s brief,

supra, fn. 3. The central problem involved in the ‘‘rack-

eteering injury’’ requirement, however, lies in defining and

applying the term. As the Seventh Circuit in Haroco has

observed, those courts which have sought to impose this

requirement have been unable to formulate a meaningful

definition. 747 F.2d at 387-389. Indeed, the Sedima court

has done little more than state that a racketeering injury

is something more than the proximate results of the RICO

predicate acts, and must be caused by activity of a kind

which RICO was designed to deter. 741 F.2d at 495-496.

To mak? matters even more clouded, in the Sedima’s com-

panion case, decided one day later, Bankers Trust v.

Rhoades, 741 F.2d 511 (2d Cir. 1984) (application for cert.

pending, No. 84-657), the Second Circuit required that this

‘*something more’’ result from all of the essential elements

of the RICO violation. 741 F.2d at 515-517.

The Second Circuit’s definition of ‘‘racketeering in-

jary’’ thus offers no practical guidance to the potential gov-

ernmental or private plaintiff, or to courts faced with mo-

tions for the dismissal of otherwise meritorious civil RICO

actions. Litigants are left with little more than an ‘‘I know

it when I see it’’ standard [see, Haroco, 747 F.2d at 389,

citing Williamette Savings & Loan v. Blake & Neal Finance

Co., 577 F.Supp. 1415, 1430 (D.Ore. 1984) ; Waste Recovery

Corp. v. Mahler, 566 F.Supp. 1466, 1468-1469 (S.D.N.Y.

12

1983) ], and the implication in Sedima is that the court will

know and sustain civil RICO actions only when La Cosa

Nostra, the Mafia or similar organized crime groups are

involved. Thus, the ‘‘racketeering injury’’ requirement

has brought RICO jurisprudence full circle to the ‘‘organ-

ized crime nexus’’ requirement rejected, as noted in Haroco,

747 F.2d at 394-395, in Bennett v. Berg, 685 F.2d 1053 (8th

Cir. 1982) and those cases cited in Sedima, supra at fns. 31

and 32.

The potential damage caused by the ‘‘racketeering in-

jury’’ requirement extends even to those cases in which

‘‘mobsters’’ are involved. There is nothing magical about

the involvement of ‘‘mobsters’’ which will conjure up the

additional consequential injuries suggested as requisite to

a valid civil RICO suit by Sedima and Bankers Trust.

Even in cases in which there has been a successful criminal

RICO prosecution of a ‘‘mobster,’’ under the Sedima/

Bankers Trust rule, argument will be made that the sub-

sequent civil RICO action should fail, if, as is often the

case, the only injuries are those caused by the predicate

acts. Thus, the Sedima/Bankers Trust standard does not

even serve to focus civil liability upon those whom it iden-

tifies are the prime targets of RICO and thus, does not

fulfill RICO’s civil objectives as a statute which was

‘‘deliberately’’ drafted to be ‘‘extraordinarily broad.’’

Haroco, 747 F.2d at 390.

It is clear from the above that reversal of Sedima and

affirmance of Haroco is appropriate, both to avoid violence

to the statutory language and to preserve the civil remedy

which Congress intended to give to ‘‘persons,’’ and in par-

ticular, governmental institutions, who have been fraud-

ulently victimized by organized patterns of criminality.

13

Conclusion

Civil RICO [18 U.S.C. §1964(c)] should be liber-

ally construed as Congress intended to permit viable

causes of action without previous criminal convictions

and without pleading and proof of “racketeering

injury.”

Dated: February 15, 1985

Respectfully submitted,

MarTIN BRADLEY ASHARE

Suffolk County Attorney

Mark D. CoHEN

LAURENCE La PoINTE

James J. O’RourKE

Special Assistant County Attorneys

Of Counsel