Amicus Curiae Brief — Mohawk Industries, Inc. v. Williams

Supreme Court brief2006

Ask Donna

What actually matters in this document.

Text

(i) , FILED

FEB 2- 2006 =

No. 05-465 OFFICE OF THE CLERK ;

Jn The Supreme Court of the Anited States

MOH AWK INDUSTRIES, INC..,

‘ Petitioner,

SHIRLEY WILLIAMS, GALE PELFREY, BONNIE JONES, AND

LORA SISSON, INDIVIDUALLY AND ON BEHALF OF A CLASS,

Respondents.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

BRIEF OF THE NATIONAL ASSOCIATION OF

MANUFACTURERS, ASSOCIATED BUILDERS

AND CONTRACTORS, INC., THE CARPET AND

RUG INSTITUTE, AND AMERICAN STAFFING

ASSOCIATION AS AMICI CURIAE IN

SUPPORT OF PETITIONER

MICHAEL J. MUELLER JAN S. AMUNDSON

Counsel of Record QUENTIN RIEGEL

MICHAEL A. FITZPATRICK NATIONAL ASSOCIATION

THOMAS L. SIMEK Or MANUFACTURERS

JAMES E. SHERRY 1331 PENNSYLVANIA

AKIN GUMP STRAUSS HAUER AVENUE, NW

& FELD, LLP WASHINGTON, DC 20004

1333 New HAMPSHIRE Tet: (202) 637-3000

AVENUE, NW

WASHINGTON, DC 20036

“TEL: (202) 887-4000

Attorneys for Amici Curiae the National Association

of Manufacturers, Associated Builders and

Contractors, Inc., The Carpet and Rug Institute,

and American Staffing Association

AMERICAN FINANCIAL PRINTERS @ (202) 464-5500

TABLE OF CONTENTS

ee ET setehetnintisicttaleencniitnitanlaasitiitecilnitintnnieias

TUTTE <hilscchtitimieshbochacblesiuigiintiianiabeasiiclidipadibedlich peaboagaiteitias

THE ELEVENTH CIRCUIT’S DECISION

UNFAIRLY EXTENDS RICO LIABILITY TO

CORPORATIONS THAT USE THIRD-PARTY

CONTRACTORS, SUCH AS EMPLOYMENT

RECRUITING FIRMS AND STAFFING AGEN-

CIES, TO CONDUCT NORMAL BUSINESS

OPERATIONS. BECAUSE THESE

OPERATIONS MUST BE ACCOMPLISHED

THROUGH AGENTS, WHETHER EMPLOYEES,

SUBSIDIARIES, OR THIRD-PARTY

CONTRACTORS, THE LOWER COURT’S

DECISION ARBITRARILY ENCOURAGES

INEFFICIENT VERTICAL INTEGRATION AND

DISCOURAGES NORMAL CONTRACTUAL

2 ___,_ IE en eam DEE ar nen TMT

A. The Eleventh Circuit’s Decision Rests Upon

An Arbitrary Distinction Between

Corporations That Contract With Third

Parties For Necessary Services And

Corporations That Perform All Such

Functions “In House.” This Distinction Is

Contrary To RICO’s Plain Purposes And

Will Tend To Discourage Economically

Efficient Corporate Contracting In Favor

Of Inefficient Vertical

NITIES ‘csicisiestnietiniineitasalibectiiepulidsdiadesiddeitdidamaieiins

The Use Of Third-Party Service Contractors,

Including Recruiting Firms And Staffing

Agencies, Is A Ubiquitous Feature Of The

Modern American Economy ..................:0++++

The Eleventh Circuit’s Decision Threatens

To Undermine The Stability Of Necessary

And Advantageous Business Relationships

Between Corporations And Third-Party

Contractors By Allowing Such Relationships

Te Be The Basis For Lengthy And

ENPORSIVE RIOD Sets .......cccsesccsecevessveseseees

Il. THE COURT SHOULD ADOPT A BRIGHT-

LINE RULE THAT A CORPORATION CANNOT

BE A MEMBER OF A RICO ASSOCIATION-IN-

FACT ENTERPRISE OR, ALTERNATIVELY,

THAT SUCH AN ENTERPRISE CANNOT

CONSIST OF A CORPORATION AND THE

THIRD-PARTY SERVICE PROVIDERS IT USES

TO CARRY OUT ITS NORMAL BUSINESS

Es TET cdevinsisiscunleinttanavicisiilipeasanssahediontannntitis

Bright-Line Rules Should Be Preferred In

Cases Affecting Significant Commercial

Interests, Because Efficient Business

Planning Requires Plain And Predictable

Statements Of Legal Rights And

IIIT sccesidbciniestonsiseccinvcdveanievnlindiuaniihigndugiinan

This Case Calls For A Bright-Line Rule

Excluding Corporations From RICO Asso-

ciation-in-Fact Enterprises Or, Alternatively,

A Holding That Such An Enterprise Cannot

Consist Of A Corporation And The Third-

Party Contractors It Uses To Carry Out Its

Normal Business Functions ..................0005 20

PUPP ETETTTEY ilsiiesuiesddopssiiovensicsisiularaiiedinssibienssiniesioilntacieiieanbin 25

TABLE OF AUTHORITIES

Cases

Aetna Cas. & Sur. Co. v. P & B Autobody, 43 F.3d 1546

POUR TIFIED scceesccernnssinenicitcaticsuntiipaidiaeinediaceenntl 8

Associated Gen. Contractors of Cal., Inc. v. Carpenters,

GEG GE. PEO CTORSD iinccnniniieimein tannin 15

Baker v. IBP, Inc., 357 F.3d 685 (7th Cir. 2004) ......... 5,6,24

Bessette v. Avco Fin. Servs., Inc. 230 F.3d 439 (Ast Cir.

TITEL wistwsientwisiititmbeiniabaaiimsiniarinen Needinciaiis a eee ee 6

Canyon County v. Syngenta Seeds, Inc., No. CV05-306-S-

EJL, 2005 WL 3440474 (D. Idaho Dec. 14, 2005) ....... 5

Cedric Kushner Promotions, Ltd. v. Don King,

Bae ULE. CIE GOOD vescsrecnnnevinecseeninmnnaien 8,15,22,23

Commercial Cleaning Servs., LLC v. Colin Serv. Sys., Inc.,

AF FOG SPO CRS GO, SESE) crccsivinvsinvinnnchidamna 5

Discon, Inc. v. Nynex Corp., 93 F.3d 1055 (2d Cir.

SO OED ssovevincicsssetusimactiasiatendediasiiaaianaaai 6,24

Fitzgerald v. Chrysler Corp., 116 F.3d 225

CPG: COMED cucvscnvitnisesinntiipplintaiieaumeata 6,7,9,21,22,24

H.J. Inc. v. Northwestern. Bell Tel. Co.,

Te She ee ED coveniectanmlsdibncpedseeischiaaameieine 15,20

Holmes v. Securities Investor Protection Corp.,

FEe US. Fae CRIED coreciseesvienititrcieoenenenin 15,24

Mendoza v. Zirkle Fruit Co., 301 F.3d 1163 (9th Cir.

ieee cliahiadaictieipeladdiediictpiaeisbiamanaicctenienee 5

Mohawk Indus., Inc. v. Williams, 411 F.3d 1252

I ee 4,15,16,21

Quill Corp. v. North Dakota, 504 U.S. 298 (1992) ........... 19

National Organization for Women, Inc. v. Scheidler,

I ad acciintiealntnsctinsenstetsnn 16,23

R.R. Brittingham v. Mobi! Corp., 943 F.2d 297

lic inteaintaariicaniens 6,7,8,22,24

Reves v. Ernst & Young, 507 U.S. 170 (1993) oo... 24

Riverwoods Chapaqua Corp. v. Marine Midland Bank,

Ee A | 6,22

Scheidler v. Nat'l Org. for Women, Inc., 537 U.S. 393

SII ieiinbeshaceetsahliiiiadiahiasiabiibeseibdittineaiiaeneantmiacemignantesenes 16

Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985) ......... 15

Sinclair v. Hawk, 314 F.3d 934 (8th Cir. 2003) .0000000cccc.. 8

Tafjlin v. Levitt, 493 U.S. 455 (1990) oocccccccccecccceceeeeeeeeees 15

Trollinger v. Tyson Foods, Inc., 370 F.3d 602

SEE ee ea 5

United States v. Turkette, 452 U.S. 576 (1981) .... 8,16,22,23

United States Dept. of Justice v. Reporters Comm. for

Freedom of the Press, 489 U.S. 749 (1989) 000.0... 20,22

Statutes

Soe es Oe CO IIEED cciterrevinensecetbiniinniiatitabatsibiibaanded 8,23

a a Ob IIT cctsiccccctrstsiicenieniinenntipicinienseinitesitaliineas 7,8

Miscellaneous

AMERICAN STAFFING ASSOCIATION (ASA), STAFFING

INDUSTRY ECONOMIC ANALYSIS, available at

http://www.americanstaffing.net/statistics/

I iia 10-11

Jessica COHEN, WILLIAM T. DICKENS, & ADAM POoseEN,

HAVE NEW HUMAN RESOURCE MANAGEMENT

PRACTICES LOWERED THE SUSTAINABLE

UNEMPLOYMENT RATE? 8-10 (2001), available at

http://www. brookings.org/views/papers/dickens/-

EET ILE IE IG EES ET AE I Be 911,12

DELOITTE CONSULTING & THE NATIONAL ASSOCIATION OF

MANUFACTURERS (NAM), 2005 SkiLLs GAP REPorRT —

A SURVEY OF THE AMERICAN MANUFACTURING

WorKFORCE | (2005), available at

http://www.nam.org/s nam/bin.asp?CID=89&

DID=235731&DOC=FILE.PDF ou... eee 10,12

Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L.

BO: Was IIIT cichcstinsinsiciiinccstaminspansigheainiunitemshininecicaiatalaaitaie 21

MARCELLO EsTEVAO & SAut LACH, EMPLOYMENT

POLICIES INSTITUTE, MEASURING TEMPORARY LABOR

OUTSOURCING IN U.S. MANUFACTURING I 1-12

(2001), available at http://www.cpionline.org/

studies/estevao 12-2001 pdf .............ccceeseceeseeeesereeees 12

Vil

Federal Judicial Caseload Statistics, Table C-2 (U.S.

District Courts—Civil Cases Commenced, by Basis

of Jurisdiction and Nature of Suit), available at

http://www.uscourts.gov/library/

IND «. cienicitintinrnnisisiiiitslinnenncctiiiinimstabcinpns 15

Howard Foster, Letter from Yakima, WA: On the Fruit Front

Line (Nov. 21, 2003), available at

http://64.233.167.104/search?q=cache:KnEXtDf9micJ:

www.vdare.com/misc/foster_yakima.htm+%22hward+f

oster%22+%22letter+from+ Y akima%22&hi=en&gl=us

RR IIITT OT - cduitsinnisetnetaiteninsiseitinnesanedniiimiianibiatanetaiomgian 5

Susan N. Houseman, Arne L. Kalleberg, & George A.

Erickcek, The Role of Temporary Agency Employment

in Tight Labor Markets, 57 INDUS. & LAB. REL.

I aS Se a 11

Louis Kaplow, Rules Versus Standards: An Economic

Analysis, 42 DUKE L.J. 557 (1992) ..0.0....... 17,18,19,21

LAWRENCE F. KATZ & ALAN B. KRUEGER, THE HIGH

Pressure U.S. LABOR MARKET OF THE 1990s (1999),

available at

http://www. irs.princeton.edu/krueger/working _

UNE ciliinpiiiniaietcitesscalimitalsailt idiiaasaatintitliiatindias 10

Jonathan R. Macey, The Internal and External Costs and

Benefits of Stare Decisis, 65 CH1.-KENT L. REV. 93

___ REERREER REGIS, oR ee Derk IN itt SE, SNOT 18

Jim McKay, Sony ready to hire 1,000, Pittsburgh Post-

Rs CUR A UIE spicinccetticnbintiitedhhant taieenctacatih atta laces 11

vill

NPR Morning Edition: Firm Settles Suit Over

Undocumented Workers (NPR radio broadcast Jan. 24,

2006), available at http://www.npr.org/templates/story/

story.php?storyld=5 169694 5

IPP eae eee eee ee eee eee ee eee eee ee eee)

Antonin Scalia, The Rule of Law as a Law of Rules,

ke FR | en 18,20

Pierre Schlag, Rules and Standards, UCLA L. REv. 379

(1985)

Cass R. Sunstein, Problems with Rules, 83 CAL. L. REv.

IES ee AEF Area sere onan aaR es 17,18

U.S. DEPARTMENT OF LABOR, BUREAU OF LABOR

STATISTICS, JOB OPENINGS AND LABOR TURNOVER

SuRVEY (2005), available at http://data.bls.gov/cgi-

IIIT ccccccstsisrnseaininniuenevenssavnibiatiiagtanutiiins 13

U.S. SMALL BUSINESS ADMINISTRATION, OFFICE OF

ECONOMIC RESEARCH, MAJOR INDUSTRIES BY NAIC’s

CODES: PRIVATE EMPLOYER FIRMS, ESTABLISHMENTS,

EMPLOYMENT AND ANNUAL PAYROLL BY FIRM SIZE,

1998-2002 (2002), available at

http://www.sba.gov/advo/research/us_tot_mi_n.pdf .. 13

INTERESTS OF AMICI CURIAE'

The National Association of Manufacturers (NAM) is

the nation’s largest industrial trade association, representing

small and large manufacturers in every industrial sector and

in all fifty states. The NAM’s mission is to enhance the

competitiveness of American manufacturers by shaping a

legislative and regulatory environment conducive to U.S.

economic growth and to increase understanding among

policymakers, the media, and the general public about the

vital importance of manufacturing to America’s economic

future and living standards. —_—

Associated Builders and Contractors, Inc. (ABC) is a

national association representing 23,000 merit shop

construction and construction-related firms in seventy-nine

chapters across the United States. ABC’s membership

represents all specialties within the domestic construction

industry and is composed primarily of firms that perform

work in the industrial and commercial sectors of the

industry. ABC serves as the construction industry’s voice

with the legislative, executive, and judicial branches of the

federal government and with state and local governments.

The Carpet and Rug Institute (CRI) is the national trade

association representing the carpet and rug industry. The

Institute's membership consists of manufacturers

representing over ninety-five percent of all carpet produced

in the United States as well as suppliers of raw materials and

services to the industry. The Institute also coordinates with

other segments of the carpet and rug industry, including

' The parties have consented to the filing of this brief. Their consent

letters are on file with the Clerk of the Court. Pursuant to Supreme Court

Rule 37.6, counsel for amici curiae certifies that this brief was not written

in whole or in part by counsel for any party, and that no person or entity

other than amici has made a monetary contribution to the preparation and

submission of this brief.

distributors, retailers, and installers. CRI members and staff

are intensely involved in facilitating cooperative solutions to

all industry challenges, including in the area of governmental

affairs.

The American Staffing Association (ASA) is the largest

national trade association representing temporary and

contract staffing agencies in the United States. Its more than

1,100 member firms operate over 15,000 offices that

generate approximately eighty-five percent of U.S. staffing

industry revenues. ASA promotes its members’ interests by

encouraging ethical business conduct, educating its members

regarding laws and regulations applicable to the staffing

industry, and fostering public and governmental

understanding of the industry and its beneficial role in the

economy.

Certain members of the above-listed organizations, as

well as other organizations in their industries and trades,

have been named as defendants in a number of private civil

suits under the Racketeer Influenced and Corrupt

Organizations Act (RICO). Amici curiae submit this brief to

address the definition of an association-in-fact enterprise

under RICO and to apprise the Court of the unfair and

deleterious consequences these organizations will face unless

the lower court’s ruling is reversed.

SUMMARY OF ARGUMENT

The Eleventh Circuit held that a civil RICO plaintiff can

state a claim by pleading that a corporation, in the course of

conducting its own hiring affairs, committed predicate

racketeering acts in “loose or informal” association with

other “distinct entities.” In this case, the putatively distinct

entities were an employment agency and _ individual

employment recruiters. This holding extends civil RICO

liability unfairly and oppressively to corporations that use

third-party service providers to conduct the corporations’

own normal business operations.

The effects of such a rule, if it were the law of the land,

would be both arbitrary and pernicious. All corporations

must carry out their business functions by using

agents—whether employees, subsidiaries, or third-party

contractors. Indeed, the use of third-party contractors is a

ubiquitous feature of modern American business practice.

Manufacturers, building contractors, and other employcrs

depend upon employment recruiting firms and _ staffing

agencies to fill their permanent and temporary labor needs in

a market whcre qualified employees are scarce. The

Eleventh Circuit's expansive rule will encumber American

companies with the burdensome costs of preventing and

defending against RICO strike suits. A predictable result of

such a rule will be to encourage businesses to avoid RICO

liability by foregoing economically advantageous

relationships with third-party contractors and vertically

integrating their business operations. This was not the goal

of RICO.

The decision below also should be rejected because it is

loose, unclear, and too easily satisfied at the pleading stage.

The Eleventh Circuit’s holding provides little, if any,

guidance to businesses about how to structure their affairs to

minimize exposure to RICO claims. This Court should

reject the Eleventh Circuit’s “test” in favor of the statute’s

bright-line rule that excludes corporations from the

definition of an “association-in-fact” enterprise.

Alternatively, this Court should rule that a corporation and

the third-party service providers it relies on to carry out

normal business operations cannot constitute a cognizable

RICO enterprise.

ARGUMENT

l THE ELEVENTH CIRCUIT’S DECISION

UNFAIRLY EXTENDS RICO LIABILITY TO

CORPORATIONS THAT USE THIRD-PARTY

CONTRACTORS, SUCH AS EMPLOYMENT

RECRUITING FIRMS AND STAFFING AGEN-

CIES, TO CONDUCT NORMAL BUSINESS

OPERATIONS. BECAUSE THESE OPERATIONS

MUST BE ACCOMPLISHED THROUGH

AGENTS, WHETHER EMPLOYEES, SUBSID-

IARIES, OR THIRD-PARTY CONTRACTORS,

THE LOWER COURT'S DECISION ARBITRAR-

ILY ENCOURAGES INEFFICIENT VERTICAL

INTEGRATION AND DISCOURAGES NORMAL

CONTRACTUAL RELATIONSHIPS.

The Eleventh Circuit’s decision in this case upheld the

pleading of a civil RICO claim against a corporation,

Mohawk Industries, Inc. (Mohawk), for allegedly conducting

the affairs of a larger, fictional “association-in-fact”

enterprise comprising Mohawk itself, a temporary placement

services entity with which Mohawk had a relatively formal

business relationship, and other third-party employment

recruiters. Mohawk Indus., Inc. v. Williams, 411 F.3d 1252,

1257-60 (llth Cir. 2005). Thus, under the Eleventh

Circuit’s decision, a plaintiff may state a RICO claim against

a corporation merely by alleging that the corporation, in the

course of conducting what are essentially the corporation’s

own aftairs, committed predicate unlawful acts in association

with others. Given the extent to which American businesses

rely on agents and third-party contractors to carry out routine

commercial activities, this ruling can be expected to have a

number of pernicious consequences, particularly, but not

exclusively, in the context of employee recruiting and

staffing.”

At its core, the Eleventh Circuit’s decision rests upon an

arbitrary distinction between corporations that use third-

party agents to conduct corporate activities and corporations

that conduct these activities using their own employees,

divisions, or subsidiaries. The Eleventh Circuit’s decision

thus announces a doctrine that will unfairly and oppressively

permit claims to proceed against companies that, short of

bringing all contracted services “in house,” have no

alternative but to associate with third-party contractors.

From the perspective of the harms RICO is designed to

* If affirmed, the Eleventh Circuit’s ruling is likely to encourage the

spread of the type of civil RICO claim presently before the Court, that is,

suits alleging that employers hired undocumented illegal aliens using

outside recruiting firms and staffing agencies brought by either employees

secking treble damages wages or others alleging they were harmed by the

hiring of illegal aliens. In recent years, a number of similar lawsuits have

been filed. See Trollinger v. Tyson Foods, Inc., 370 F.3d 602 (6th Cir.

2004); Baker v. IBP, Inc., 357 F.3d 685 (7th Cir. 2004); Mendoza v. Zirkle

Fruit Co., 301 F.3d 1163 (9th Cir. 2002); Commercial Cleaning Servs., LLC

v. Colin Serv. Sys., Inc., 271 F.3d 374 (2d Cir. 2001); Canyon County v.

Svangenta Seeds, Inc., No. CV0S-306-S-EJL, 2005 WL 3440474 (D. Idaho

Dec. 14, 2005). Counsel for the plaintiffs in Mendoza has stated that dozens

of employees have contacted him to pursue similar claims in various other

industries. See NPR Morning Edition: Firm Settles Suit Over

Undocumented Workers (NPR radio broadcast Jan. 24, 2006), available at

http://www.npr.org/templates/story/story.php?storyld=5 169694 (last visited

Jan. 24, 2006). Even in cases that do not hold much promise of significant

monetary recovery, a ruling affirming the Eleventh Circuit’s broad approach

to association-in-fact enterprises will encourage civil RICO litigation

intended primarily to advance a political agenda. Respondents’ counsel

presents his RICO lawsuits against corporations that allegedly hire illegal

aliens as only one front in a private war. See Howard Foster, Letter from

Yakima; WA: On the Fruit Front Line (Nov. 21, 2003), available at

htup://64.233.167.104/search?q=cache: KnEXtDf9micJ:www.vdare.cony/

mise/foster_yakima.htm>%22hward* foster%22 +%22letter+from+ Y akim

a%22&hl=cn&gl=us&ct=clnk&cd= | (last visited Jan. 24, 2006).

address, there is simply no basis for distinguishing between

these two approaches to running a business.

A. The Eleventh Circuit’s Decision Rests Upon An

Arbitrary Distinction Between Corporations

That Contract With Third Parties For

Necessary Services And Corporations That

Perform All Such Functions “In House.” This

Distinction Is Contrary To RICO’s Plain

Purposes And Will Tend To _ Discourage

Economically Efficient Corporate Contracting

In Favor Of Inefficient Vertical Integration.

The courts of appeals universally have rejected attempts

to plead a RICO association-in-fact enterprise where the

alleged enterprise consists of the corporation together with

its employees, see, ¢e.g., Riverwoods Chapaqua Corp. v.

Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d Cir.

1994), or the corporation with its subsidiaries, see, e.g.,

Bessette v. Avco Fin. Servs., Inc. 230 F.3d 439, 449 (lst Cir.

2000). The Second, Third, and Seventh Circuits have

reasonably extended this principle to cases involving

corporations and third-party service contractors, and have

rejected attempts to plead association-in-fact enterprises in

cases involving corporations contracting with third-party

agents to conduct routine business activity. See Baker v.

IBP, Inc., 357 F.3d 685, 691 (7th Cir. 2004); Fitzgerald v.

Chrysler Corp., 116 F.3d 225, 226-27 (7th Cir. 1997);

Discon, Inc. v. Nynex Corp., 93 F.3d 1055, 1064 (2d Cir.

1996); R.R. Brittingham v. Mobil Corp., 943 F.2d 297, 300-

02 (3d Cir. 1991). These courts have recognized that there is

no functional difference between a corporation that conducts

certain activities, such as_ recruiting employees or

distributing products, through tts own internal divisions or

subsidiaries and one that performs these functions through

the use of third-party agents. In both instances, the

corporation is simply conducting its own affairs, not the

affairs of a separate and distinct enterprise. See, e.g.,

Fitzgerald, 116 F.3d at 227 (“What we cannot imagine, and

what we do not find any support for in appellate case law, is

applying RICO to a free-standing corporation such as

Chrysler merely because Chrysler does business through

agents, as virtually every manufacturer does.”’); Brittingham,

943 F.2d at 301 (“We believe a § 1962(c) enterprise must be

more than an association of individuals or entities

conducting the normal affairs of a defendant corporation.”).

In contrast to these rulings, the decision below would

allow a plaintiff to plead a RICO claim against a corporate

defendant simply by alleging that the corporation contracted

with third-party service providers to accomplish an essential

corporate function, in this case hiring employees. The

Eleventh Circuit thus creates an arbitrary and oppressive

distinction between corporations that conduct their

operations through outside contractors and corporations that ©

conduct these operations internally or through wholly-owned

subsidiaries. If, in this case, the plaintiffs had pleaded that

Mohawk recruited its employees solely through an internal

department charged with identifying and hiring potential

employees, the plaintiffs would not have stated a claim under

the accepted principle that a corporation together with its

employees cannot constitute a RICO enterprise distinct from

the corporation itself. Only because Mohawk allegedly——— _

retained a third-party recruiter to accomplish this task has the

Eleventh Circuit permitted plaintiffs to proceed with their

RICO claim. Whether it had used outside recruiters or an

internal recruiting department, Mohawk has done nothing

more than conduct a routine and essential business task,

hiring employees. The Eleventh Circuit offered no reason

why Mohawk’s use of outside recruiters presented the

particular concerns RICO was designed to address.

This Court has identified two distinct purposes

underlying RICO. The first of these purposes is to protect

corporations from persons and entities that would use the

corporations for their own unlawful purposes. See Cedric

Kushner Promotions, Ltd. v. Don King, 533 U.S. 158, 162

(2001) (identifying as among RICO’s purposes “prevent[ing]

a person from victimizing, say, a small business” and

“prevent[ing| a person from using a corporation for criminal

purposes”). The second, distinct purpose of the RICO

Statute 1s to facilitate the prosecution of organized crime.

See United States v. Turkette, 452 U.S. 576, 584 (1981)

(observing that RICO addresses not only the misuse of

“legitimate businesses,” but also the operation of “wholly

illegitimate enterprises”). The statute accomplishes its first

purpose in part by making it unlawful to “conduct [an]

enterprise’s affairs through a pattern of racketeering

activity.” 18 U.S.C. § 1962(c) (2000). The statute

accomplishes its second purpose by defining “enterprise” to

include “group[s] of individuals associated in fact although

not a legal entity.” 18 U.S.C. § 1961(4) (2000). Consistent

with this statutory language and the decisions of this Court,

the courts of appeals have consistently identified RICO’s

twin purposes as the protection of legitimate businesses from

criminal misuse and the prosecution of organized crime.

See, e.g., Brittingham, 943 F.2d at 300; Sinclair v. Hawk,

314 F.3d 934, 943 (8th Cir. 2003); Aetna Cas. & Sur. Co. v.

P & B Autobody, 43 F.3d 1546, 1558 (ist Cir. 1994).

There is nothing, however, in the language, legislative

history, or judicial interpretations of RICO to support the

arbitrary and economically irrational penalization of

corporations that use third-party contractors to perform

functions that other corporations perform “in house.” Amici,

like Chief Judge Posner of the Seventh Circuit Court of

Appeals, “have never heard it suggested that RICO was

intended to encourage vertical integration... .” See

Fitzgerald, 116 F.3d at 227. To the contrary, it is plainly

offensive to RICO’s business-protective purposes to

transform the statute from a shield designed to protect

legitimate businesses from misuse into an arbitrary and

discriminatory weapon for suing businesses that rely on

third-party service providers. Just as the courts of appeals

have unanimously refused to subvert RICO’s business-

protective purposes by rejecting alleged association-in-fact

enterprises predicated on corporations acting through

employees and subsidiaries, so too should this Court refuse

to apply the statute to the materially identical circumstances

of corporations using third-party service contractors.

B. The Use Of Third-Party Service Contractors,

Including Recruiting Firms And _ Staffing

Agencies, Is A Ubiquitous Feature Of The

Modern American Economy.

The Eleventh Circuit’s decision has the potential to

expand dramatically the filing of civil RICO claims because

American businesses increasingly rely on independent agents

and contractors in carrying out routine commercial activities.

In particular, a growing number of American companics

from diverse industries use third-party recruiting firms to

hire permanent workers and third-party staffing agencies to

obtain temporary and contract employees.’ Recruiting firms

and staffing agencies perform vital functions for American

business, both by reducing the transaction costs involved in

matching skilled employees with employers and by enabling

> See JESSICA COHEN, WILLIAM T. DICKENS, & ADAM POSEN, HAVE NEW

HUMAN RESOURCE MANAGEMENT PRACTICES LOWERED THE SUSTAINABLE

UNEMPLOYMENT RATE? 8-10 (2001), available at

http://www. brookings.org/views/papers/dickens/-20010515.htm — (citing

various studies documenting the explosive growth of temporary and contract

labor in the 1980s and 1990s) (last visited Jan. 23, 2006).

employers to meet their labor demands during periods of

relative labor scarcity.’

The gap between manufacturers’ need for skilled

workers and the decreasing number of workers available to

meet this demand 1s one of the most significant problems

facing American manufacturers today.° This dearth of

skilled labor frustrates manufacturers’ ability to achieve

optimal production levels, increase productivity, and meet

consumer demand.° In a recent study, eighty-one percent of

manufacturers surveyed stated that they were facing a

moderate to severe shortage of qualified workers.’ In

addition, fifty-three percent of survey respondents stated that

at least ten percent of their total positions currently remain

unfilled due to a lack of qualified candidates."

Faced with a shortage of permanent skilled labor,

manufacturers and employers in other industries rely heavily

on third-party recruiting firms to meet their demand for such

workers.’ Recruiting firms have the resources and expertise

See LAWRENCE F. KATZ & ALAN B. KRUEGER, THE HIGH PRESSURE

U.S. LABOR MARKET OF THE 1990s 40 (1999), available at

http://www. irs.princeton.edu/krueger/working_papers.html (stating that

staffing agencies that supply temporary and contingent workers help reduce

hiring costs and labor market bottlenecks and facilitate better matches

between employees and employers) (last visited Jan. 24, 2006).

> See DELOITTE CONSULTING & THE NATIONAL ASSOCIATION OF

MANUFACTURERS (NAM), 2005 SKILLS GAP REPORT — A SURVEY OF THE

AMERICAN MANUFACTURING WORKFORCE | (2005), available at

http://www.nam.org/s nam/bin.asp?C1ID=89& DID=235731&DOC=

FILE.PDF (last visited Jan. 23, 2006).

® See id. at i.

’ See id. at 4.

* See id.

* According to the American Staffing Association, independent recruiting

firms and staffing agencies are particularly important for companies in all

industries during periods of economic growth because companies face rising

demand for workers at a time when the labor market often is tightening.

necessary to identify potential employees and match them

with appropriate employment opportunities.'” In contrast,

employers often do not have the same ability to identify and

match skilled employees with employers’ needs. It ts often

more costly for employers to devote company time and

resources to locating and hiring skilled labor than to rely on

outside recruiting firms."'

In addition to using outside recruiters to satisfy their

demand for permanent workers, American companies are

increasingly dependent on outside staffing agencies to

provide them with temporary, contract, and other contingent

employees.'? The use of temporary and contract workers

supplied by outside staffing agencies has expanded

substantially since the mid-1990s.'’ By 2004, U.S. staffing

AMERICAN STAFFING ASSOCIATION (ASA), STAFFING INDUSTRY ECONOMIC

ANALYSIS, available at http://www.americanstaffing.net/stat-

istics/economic2005.cfm (last visited Jan. 23, 2006).

"For example, in confronting a surge in demand for big-screen

televisions in 2004, Sony hired 1,700 skilled contingent workers to meet its

production needs. Sony used an outside placement firm that had to sift

through 15,000 applications just to find the 1,700 employees that were

eventually hired. See Jim McKay, Sony ready to hire 1,000, PITTSBURGH

Post-GAZETTE, May 29, 2005, available at LEXIS, News Library, Kniritrb

File.

'' In tight labor markets, outside recruiting firms and staffing agencies

enjoy economies of scale in recruiting and screening workers, and thus can

increase the efficiency with which employees are matched with employers.

See Susan N. Houseman, Arne L. Kalleberg, & George A. Erickcek, The

Role of Temporary Agency Employment in Tight Labor Markets, 57 INDUS.

& LAB. Rev. Rev. 105, 125 (2003).

See COUEN FT AL., supra note 3, at 17-18, 27 (summarizing results of

interviews with human resource managers regarding the use of temporary

workers supplied by staffing agencies).

'’ The 1990s witnessed an upsurge in the use of contracting, outsourcing,

and temporary workers as firms, particularly in the manufacturing sector,

reorganized the structure of their hiring of labor in response to increased

competitive pressure and technical change. See COHEN ET AL., supra note

3, at 4-5.

agencies employed an average of 2.55 million temporary and

contract workers per day, and had hired a total of 11.7

million employees.'* American companies rely on outside

staffing agencies to provide a reliable source of temporary

and contract employees to meet their ever-changing short-

term labor needs. The increased use of contract and

temporary workers has been a key element of the

transformation of the American workplace over the last two

decades."°

The use of outside staffing agencies to provide

temporary and contract workers is particularly important in

the manufacturing sector." In the NAM’s 2005 Skills Gap

Report, prepared by Deloitte Consulting, one-third of the

manufacturing firms surveyed stated that in order to fill their

need for highly-skilled employees, they would increase their

use of temporary contract workers.'’ Moreover, as noted in a

study by the Employment Policies Institute, staffing agencies

that supply temporary and contingent workers help to

increase employment in the manufacturing sector by

providing U.S. companies with the flexibility to adjust their

workforces in response to uncertain and ever-changing labor

needs." This study found a significant upward trend in the

hiring of temporary and contingent workers in the 1990s."°

ASA, supra note 9.

'S See COHEN ET AL., supra note 3, at 2-4.

“ See id. at 10 (reciting several studies showing the growth in the use of

temporary workers in the manufacturing sector).

"See DELOITTE CONSULTING & NAM, supra note 5, at 8.

MARCELLO EsTEVAO & SAUL LACH, EMPLOYMENT POLICIES

INSTITUTE, MPASURING TEMPORARY LABOR OUTSOURCING IN U.S.

MANUFACTURING I1-12 (2001), available at

hitp://www.cpionline.org/studies/estevao 12-2001 pdf (last visited Jan. 25,

2006); see also COMLN, ET AL., supra note 3, at 18.

" EstevAo & LACH, supra note 18, at 11.

Outside staffing agencies also play a vital role in the

construction industry, an industry that employs 5.6 percent

of this country’s entire private workforce.” While the

construction industry as a whole has a relatively steady

demand for workers, turnover often is high at individual

companies because construction projects are typically of

short duration. According to the U.S. Bureau of Labor

Statistics, monthly worker turnover in the construction

industry can vary between 4.2 and 6.9 percent.*' This high

turnover rate often produces labor shortages, despite the

widespread availability of potential employces, due to the

high transaction costs of matching available cmployees to

specific employment opportunities. Independent staffing

agencies can ameliorate this problem by providing a steady

supply of construction workers to construction firms in

response to the firms’ short-term labor demands. By

working with independent staffing agencies, construction

firms can avoid the cost of retaining permanent employees in

the face of ever-fluctuating demand for construction

services, while guaranteeing a pool of available labor that

will enable them to respond rapidly to new business

opportunities.

*’ U.S. SMALL BUSINESS ADMINISTRATION, OFFICE OF ECONOMIC

RESEARCH, MAJOR INDUSTRIES BY NAIC’S CODES: PRIVATE EMPLOYER

FIRMS, ESTABLISHMENTS, EMPLOYMENT AND ANNUAL PAYROLL BY FIRM

SIZE, 1998-2002 (2002), available at http://www.sba.gov/advo/research/

us tot mi_na.pdf (last visited Jan. 24, 2006).

U.S. DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS, JOB

OPENINGS AND LABOR TURNOVER SURVEY (2005), available at

http://data bls. zov/cgi-bin/surveymost?jt (last visited Jan. 24, 2006).

C. The Eleventh Circuit’s Decision Threatens To

Undermine The Stability Of Necessary And

Advantageous Business Relationships Between

Corporations And Third-Party Contractors By

Allowing Such Relationships To Be The Basis

For Lengthy And Expensive RICO Suits.

In light of these developments in the business

environment, particularly in the manufacturing and

construction sectors, the Eleventh Circuit's decision will

have a number of pernicious consequences. Because more

and more corporations rely on outside recruiting firms and

staffing agencies to supply necessary labor, a rule that

enables plaintiffs to plead an association-in-fact enterprise

solely because a defendant corporation contracted with an

independent service agent will result in an increase in the

number of businesses exposed to RICO liability. The

Eleventh Circuit’s unjustifiably relaxed pleading standard

for an association-in-fact enterprise may deter corporations

from using outside contractors and agents precisely when the

use of such agents is becoming increasingly widespread and

important to competitive survival. This expansion ts

unjustified, as it allows plaintiffs to use a statutory tool

designed to prevent the misuse of organizations and

eradicate organized crime against corporations that have

simply adapted to the economic realities of doing business in

the Twenty-First Century global economy. There is simply

no reason to think that corporations that-conduct their hiring

activities with the assistance of third-party recruiting firnis

or staffing agencies pose the threats RICO was designed to

combat any more than corporations that conduct these

operations “in house.”

The problem posed by the Eleventh Circuit's decision

lies in its low threshold for pleading an association-in-fact

RICO theory. The decision makes clear that very little is

required at the pleading stage, even if “the plaintiffs may be

unable to prove such allegations at trial... .”. Mohawk, 411

F.3d at 1258-60. This poses serious consequences even for

sizeable corporate defendants. RICO litigation is complex,

lengthy, and expensive. Thus, in Holmes v. Securities

Investor Protection Corp., this Court adopted a narrower

construction of RICO than that advanced by the plaintiff,

noting that a contrary approach “would open the door-te

‘massive and complex damages litigation[, which would] not

only burde[n] the courts, but also underminfe] the

effectiveness of treble-damages suits."”*” 503 U.S. 258, 274

(1992) (quoting Associated Gen. Contractors of Cal., Inc. v.

Carpenters, 459 U.S. 519, 545 (1983)) (brackets in original);

accord Tafflin v. Levitt, 493 U.S. 455, 465 (1990) (noting

“the complexities of civil RICO actions”); HJ. Inc. v.

Northwestern. Bell Tel. Co., 492 U.S. 229, 251 (1989)

(Scalia, J., concurring) (criticizing this Court’s ruling in

Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985), for

* Despite this Court’s rulings narrowing the construction of RICO, the

potential for treble damages and fee shifting have continued to make it

popular with private plaintiffs. According to the Administrative Office of

the U.S. Courts, 840 civil RICO actions were filed in the year ending March

31, 2005 (of which cight were filed by the United States); 695 in the year

ending March 31, 2004 (of which four were filed by the United States); 845

in the year ending March 31, 2003 (of which ten were filed by the United

States), 707 in the year ending March 31, 2002 (of which seven were filed

by the United States); and 791 in the year ending March 31, 2001 (of which

four were filed by the United States). See Federal Judicial Caseload

Statistics, Table C-2 (U.S. District Courts—Civil Cases Commenced, by

Basis of Jurisdiction and Nature of Suit) for each respective year, available

at http://www.uscourts. gov/library/statisticsalreports. html (last visited Jan.

22, 2006). Although the Administrative Office does not keep track of

which RICO cases involve corporate defendants, it is the experience of

amici that the vast majority of these cases have been filed against

corporations. Furthermore, because the corporate defendant must be

“distinct” from the enterprise under Cedric Kushner Promotions, Ltd. v.

King, 533 U.S. 158 (2001), a large number of these cases involve creative

allegations that the corporation is one member of an association-in-fact

enterprise that includes additional entities or natural persons.

creating “years” of litigation and “countless millions in

damages and attorney’s fees’’).

These cautionary observations have been borne out by

another civil RICO case to come before the Court. National

Organization for Women, Inc. v. Scheidler was filed in 1986,

and this Court first considered it on review of an order

granting a motion to dismiss. See 510 U.S. 249 (1994)

(NOW 1). After this Court reinstated the complaint, the

parties engaged in years of discovery and other proceedings

before the case came to this Court a second time. See

Scheidler v. Nat'l Org. for Women, Inc., 537 U.S. 393 (2003)

(NOW II). Twenty years after it commenced, the case is now

before the Court for a third decision. See Nos. 04-1244 and

04-1352.

il. THE COURT SHOULD ADOPT A BRIGHT-LINE

RULE THAT A CORPORATION CANNOT BE A

MEMBER OF A RICO ASSOCIATION-IN-FACT

ENTERPRISE OR, ALTERNATIVELY, THAT

SUCH AN ENTERPRISE CANNOT CONSIST OF

A CORPORATION AND THE THIRD-PARTY

SERVICE PROVIDERS IT USES TO CARRY OUT

ITS NORMAL BUSINESS FUNCTIONS.

The “test” provided by the Eleventh Circuit’s decision

provides little, if any, guidance to businesses about how to

structure their affairs to minimize exposure to civil RICO

claims. The Eleventh Circuit’s decision permits a civil

RICO plaintiff to cobble together an alleged association-in-

fact enterprise comprising a corporation and other “distinct

entities,” no matter how “loose or informa!” is_ the

association among them. See Mohawk, 411 F.3d at 1258.

This is hardly a standard and, indeed, it demonstrates the

unduly broad range of conjured enterprises that plaintiffs

may plead under 7urkette and still survive a motion to

dismiss. The confusion on this point explains the split in the

Circuits on the issue raised by Petitioner, and also the

uncertain exposure of American companies depending upon

the Circuit in which they do business. Amici therefore urge

this Court to adopt a bright-line rule that enables businesses

to plan efficiently while protecting them from meritless

RICO strike suits.”

A. Bright-Line Rules Should Be Preferred In

Cases Affecting Significant Commercial

Interests, Because Efficient Business Planning

Requires Plain And Predictable Statements Of

Legal Rights And Obligations.

In the contest between bright-line rules and imprecise

standards, it is generally recognized that rules have to

recommend them their clarity, uniformity, predictability, and

ease of application. See Cass R. Sunstein, Probigms with

Rules, 83 Cal. L. Rev. 953, 971-78 (1995); Louis Kaplow,

Rules Versus Standards: An Economic Analysis, 42 Duke

** lt might be argued that the Eleventh Circuit's “distinct entities” test

already constitutes a bright-line rule. However, as noted in Part I, this Court

should reject the Eleventh Circuit's analysis because it is inconsistent with

RICO’s purposes and ignores the reality that corporations always must

conduct their business through agents, often including third partics.

Moreover, the Eleventh Circuit's opinion does not actually set forth a

bright-line rule. Although the opinion states that the members of an

association-in-fact enterprise must be “individual entities,” see 411 F.3d at

1258 (quotation omitted), and also must be “distinct,” see id., there is no -

explanation of what renders one entity “individual” or “distinct” from

another. Thus, at the pleading stage, the Eleventh Circuit's opinion amounts

to no more than a “wait and see” approach, and not a bright-line rule. As

amici argue in the main text, this Court should issue a clear pronouncement

that corporations do not even qualify as “individuals” under RICO's

definition of an association-in-fact enterprise. Alternatively, the Court

' should adopt the same clear rule of limitation applied by the Second, Third,

and Seventh Circuits that corporations are never “distinct” from the agents

they rely on to conduct norma! business activities.

LJ. 557, 571-624 (1992); Antonin Scalia, The Rule of Law

as a Law of Rules, 56 U. Chi. L. Rev. 1175, 1178-81 (1989);

Pierre Schlag, Rules and Standards, 33 UCLA L. Rev. 379,

384-90 (1985). These considerations are especially

important in cases affecting significant commercial interests

and commonplace business practices, because efficient

business planning requires plain and predictable statements

of legal rights and obligations. See Sunstein, supra, at 976.

The ability of persons and businesses to understand and

exercise their legal rights, and to fulfill their legal

obligations, is a matter not only of fundamental fairness, but

also of economic efficiency. See Scalia, supra, at 1179

(“Rudimentary justice requires that those subject to the law

must have the means of knowing what it prescribes.”);

Kaplow, supra, at 621 (“[MJany individuals contemplating

behavior that may be subject to the law will find it more

costly to comply with standards [than with rules], because it

generally is more difficult to predict the outcome of a future

inquiry . . . than to examine the result of a past inquiry.”).

Indeed, clarity and predictability are of such importance to

business planning that it has become commonplace to

observe that a clear rule, even a “bad” one, is better than an

unclear rule or no rule at all. See Sunstein, supra, at 976

(“{1]t may be more important to know what the law is than to

have a law of any particular kind.”); Jonathan R. Macey, The

Internal and External Costs and Benefits of Stare Decisis, 65

Chi.-Kent L. Rev. 93, 109 (1989) (“{PJarticularly in

corporate and contractual settings, it is quite easy for parties

to contract around whatever liability rule is imposed by

courts. In these settings, it doesn’t matter what the particular

default legal rule happens to be, so long as it’s sufficiently

clear that parties don’t waste resources engaging in needless

negotiations.”’).

This Court has recognized that clear statements of legal

norms are particularly important where the norms affect

commonplace business transactions. In the area of state use

and sales taxes, for instance, this Court has observed:

Th{e] artificiality [of a bright-line rule],

however, 1s more than offset by the benefits

of a clear rule. Such a rule firmly establishes

the boundaries of legitimate state authority to

impose a duty to collect sales and use taxes,

and = reduces__siitigation == concerning

those taxes .... Moreover, a bright-line rule

in the area of sales and use taxes also

encourages settled expectations, and in doing

so, fosters investment by businesses.

Quill Corp. v. North Dakota, 504 U.S. 298, 315-16 (1992).

As the Court recognized in Quill Corp., the importance of a

clear rule to business planning is necessarily accentuated

where the rule affects routine business transactions, because

the costs of repeated inefficient transactions, economically

distorted business practices, and foregone commercial

opportunities can accumulate rapidly. See Kaplow, supra, at

621 (“The central factor influencing the desirability of rules

and standards is the frequency with which a law will govern

conduct. If conduct will be frequent, the additional costs of

designing rules—which are borne once-—-are likely to be

exceeded by the savings realized each time the rule is

applied .... Thus, when behavior subject to the relevant

law is frequent, standards tend to be more costly and result in

behavior that conforms less well to underlying norms.”).

The importance of clarity and predictability increases in

direct proportion to the severity of the consequences for

noncompliance. A concurrence by four Justices of this Court

accordingly recognized that “clarity and predictability in

RICO’s civil applications are particularly important” and

that “RICO, since it has criminal applications as well, must,

even in its civil applications, possess the degree of certainty

required for criminal laws.” HJ. Inc., 492 U.S. at 255

(Scalia, J., concurring) (joined by Chief Justice Rehnquist

and Justices O’Connor and Kennedy).

Against the clarity, uniformity, and predictability of

bright-line rules this Court must, of course, balance the

possibility of imperfect outcomes in marginal cases. See

Scalia, supra, at 1178. This Court has recognized, however,

that the disutility of imperfect results in unusual cases may

be vastly outweighed by the benefits of a well-crafted rule of _

general suitability: “Our cases provide support for the

proposition that categorical decisions may be appropriate

and individual circumstances disregarded when a case fits

into a genus in which the balance characteristically tips in

one direction.” United States Dept. of Justice v. Reporters

Comm. for Freedom of the Press, 489 U.S. 749, 776 (1989).

B. This Case Calls For A_ Bright-Line Rule

Excluding Corporations From RICO Asso-

ciation-in-Fact Enterprises Or, Alternatively, A

Holding That Such An _ Enterprise Cannot

Consist Of A Corporation And The Third-Party

Contractors It Uses To Carry Out Its Normal

Business Functions.

It is critical for businesses to have clarity and

predictability with regard to the legal liability they may face

for their commercial decisions. ‘This includes decisions

about how to structure their organizations and with whom to

conduct business. If the law creates potential liability for

contracting or affiliating with others when there would be no

exposure for the same commercial conduct if undertaken

unilaterally, that legal liability is a factor that a company

must consider. If, on the other hand, no additional legal

exposure is created by hiring third parties to engage in that

conduct on behalf of the business, then such a decision will

be made based on the merits, including such factors as the

quality of the contractor’s results and economic efficiency.

Under the Eleventh Circuit’s view, a court is required to

allow a RICO suit to progress to discovery so long as a

plaintiff alleges that a corporate defendant associated itself

with some “distinct entity” with which it shared a “common

purpose,” which could include a goal as pedestrian as

“making money.” Mohawk, 411 F.3d at 1258. This goal ts

so universal to the notion of business ventures that, if RICO

liability could be grounded on this claim, every corporation

that maintains contractual and agency relationships could be

exposed to treble damages litigation based on an

“association-in-fact” theory. The “only effect” of such a

RICO rule would be “to encourage vertical integration.” See

Fitzgerald, 116 F.3d at 227. Businesses would seek to shield

themselves from the possibility of RICO suits by avoiding

economically efficient and mutually beneficial contracts

with third-party service providers. In attempting to avoid

potential RICO exposure by taking work “in house,”

businesses would incur significant additional legal and

transactional expenses. The cumulative costs of these

inefficiencies can reasonably be expected to be enormous.

Cf Kaplow, supra, at 621. Because such costs would be

motivated by a desire to avoid legal liability rather than a

desire to achieve economic efficiencies, such a rule would

also harm consumers. See Frank H. Easterbrook, The Limits

of Antitrust, 63 Tex. L. Rev. 1, 21 (1984) (“If judges tolerate

inefficient practices, the wrongly-tolerated practices will

disappear under the onslaught of competition. The costs of

judicial error are borne by consumers, who lose the efficient

practices and get nothing in return.”). Service providers too

would be injured, because such a rule would create a smaller

market for their services. This in turn could have deleterious

consequences for employees, particularly entry-level job

applicants who depend upon recruiting firms and staffing

agencies to match their skills with employers’ needs.

A bright-line holding is appropriate here because this

case “fits into a genus in which the balance characteristically

tips in one direction.” Reporters Comm., 489 U.S. at 776.

The Eleventh Circuit’s decision exposes Mohawk to massive

civil RICO claims based on its alleged use of employment

agencies and recruiters to help locate the employees it

ultimately hired. This is a _ routine—indeed,

ubiquitous—corporate practice in today’s economy. More

generally, as the courts of appeals have consistently

recognized, the use of agents and employees to accomplish

corporate ends is not merely a commonplace practice, it 1s a

necessity arising from the incorporeal nature of the corporate

entity. See Fitzgerald, 116 F.3d at 227; Riverwoods, 30 F.3d

at 344; Brittingham, 943 F.2d at 301. To base RICO liability

on this fact would render RICO’s “association-in-fact”

provision a meaningless one in cases against corporate

defendants, for corporate defendants could a/ways be made

to fit this Procrustean bed.

This Court’s RICO jurisprudence is consistent with the

bright-line advocated by amici. As this Court observed the

first time it construed RICO’s “enterprise” element, “absurd

results are to be avoided... .”. Turkette, 452 at 580; accord

Fitzgerald, 116 F.3d at 226-27 (in deciding whether a

corporation can be part of an association-in-fact enterprise,

the court noted “a desire to make the statute make sense and

have some limits” and to “avoid absurd applications”). This

Court again expressed its skepticism of unusual readings of

the RICO statute in its most recent pronouncement on the

enterprise issue. Although the Court did not rule on the

merits of the issue, it noted in Cedric Kushner that it would

be “less natural to speak of a corporation” as being

associated with its own employees and agents—an “oddly

constructed entity.” Cedric Kushner, 533 U.S. at 164.

Admittedly, in two cases this Court has favored a

broader construction of RICO’s “enterprise” requirement

over a narrower construction. See Turkette, 452 U.S. 576;

NOW I, 510 U.S. at 260-61. In Turkette, the Court

concluded that the term “enterprise” included illegitimate

enterprises along with legitimate enterprises, noting that

Congress easily could have narrowed the sweep of the term

“enterprise” by adding the limiting word “legitimate” to the

definition in Section 1961(4). See 452 U.S. at 581. In NOW

/, the Court engaged in “parallel” reasoning, noting that

Congress had not defined “enterprise” to be limited to

groups having an economic motive. See 510 U.S. at 260-61.

This case, however, requires a different outcome so as

to avoid an absurd result at odds with the statute. Whereas

the absence of limiting language in Section 1961(4)

commanded a broader construction of the term “enterprise”

in Turkette and NOW J, here the presence of limiting

language commands a narrower construction of the term

“enterprise.” Congress has circumscribed the sweep of

association-in-fact enterprises by using the limiting word

“individuals” in defining the associations that are cognizable

under the statute. See 18 U.S.C. 1961(4) (“‘enterprise’

includes any individual, partnership, corporation,

association, or other legal entity, and any wnion or group of

individuals associated in fact although not a legal entity’)

(emphasis added). The “very common” meaning of the word

“individual” is “a private or natural person as distinguished

from a partnership, corporation, or association ... .” Black’s

Law Dictionary 773 (6th ed. 1990); The New Fowler’s

Modern English Usage 391-92 (3d ed. 1996) (“The Oxford

Advanced Learner's Dictionary of Current English (4th ed.

1989) defines the noun as follows: | a single human being

..’). Thus, it is clear from the face of the statute that

Congress did not intend for association-in-fact enterprises to

include corporations associated with others. Cf Holmes,

503 U.S. at 269 n.15 (noting that RICO’s statutory language

“drowned out” an alternative construction advanced by a

civil RICO plaintiff); Reves v. Ernst & Young, 507 U.S. 170,

183 (1993) (noting that RICO’s liberal construction clause

“is not an invitation to apply RICO to new purposes that

Congress never intended”).

Amici are confident that the rule they have proposed

would sufficiently clarify and limit RICO’s scope to permit

efficient business planning and protect necessary and

economically advantageous contractual rclationships from

meritless RICO attack. Should the Court decline to adopt

the proposed bright-line, however, amici urge the Court to

resolve the split among the circuit courts by making it clear

that a RICO enterprise cannot consist merely of a

corporation and the third-party service providers it uses in

the course of carrying out its normal business operations.

See, e.g., Brittingham, 943 F.2d at 300-02; Baker, 357 F.3d

at 691; Fitzgerald, 116 F.3d at 226-27; Discon, 93 F.3d at

1064. If this Court were to adopt the Eleventh Circuit’s

loose definition of association-in-fact enterprise, American

businesses will face the needless transactional and litigation

costs, incentives for distorted business planning, and

foregone commercial opportunities discussed above.

CONCLUSION

For the foregoing reasons, the judgment of the Eleventh

Circuit should be reversed.

Respectfully submitted,

MICHAEL J. MUELLER JAN S. AMUNDSON

Counsel of Record QUENTIN RIEGEL

MICHAEL A. FITZPATRICK NTIONAL ASSOCIATION

THOMAS L. SIMEK OF MANUFACTURERS

JAMES E. SHERRY 1331 PENNSYLVANIA

AKIN GUMP STRAUSS HAUER AVENUE, NW

& FeLp, LLP WASHINGTON, DC 20004

1333 NEW HAMPSHIRE TEL: (202) 637-3000