Petition for Writ of Certiorari — Terre Du Lac Ass'n v. Terre Du Lac, Inc.

No.

IN THE

Supreme Court of the United States

OcTOBER TERM, 1987

TERRE Du LAc ASSOCIATION, INC.,

Petitioner,

VS.

TERRE Du LAc, INc., TERRE Du LAC GoLF & COUNTRY

C.LuB, INc., TERRE DU LAc Country CLUB ASSOCIATES.

a limited partnership, C.1.T. CORPORATION, SENSIBAR

ENTERPRISES, INC., Mo-ILL_, Ltp., and JAMES O. Kwon,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

KENTON E. KNICKMEYER

One Mercantile Center

Suite 3400

St. Louis, Missouri 63101

(314) 231-7676

Counsel for Petitioner

Terre Du Lac Association, Inc.

St. Louis Law Printing Co., Inc., 1330S Manchester Road 63131 314-231-4477

I

QUESTION PRESENTED

Whether acts of racketeering acitivity committed pursuant to

a common scheme can constitute a ‘‘pattern of racketeering ac-

tivity’’ within the meaning of 18 U.S.C. $§ 1961(5), 1962?

*

The Court has already granted a petition for a writ of cer-

tiorari in a case presenting substantially the same issue, H. J.

Inc. v. Northwestern Bell Telephone Company, No. 87-1252

cert. granted, 56 U.S.L.W. 3647 (March 21, 1988). A similar

issue is presented by the petition in Marshall-Silver Construc-

tion Co., Inc. v. Mendel, No. 87-1358 (filed February 12, 1988).

II

PARTIES BELOW

All of the parties to the proceedings below are listed in the

caption. Terre Du Lac Association, Inc., Petitioner herein, is a

not for profit corporation. It is not owned by any other cor-

poration and has no subsidiaries.

ill

TABLE OF CONTENTS

Page

ee eae h nw ecésececvcees l

ve dveaaeucece 2

Statutory Provisions Involved ...................... 2

ES 3

Reasons for Issuance of the Writ .................... 5

A rr 10

Appendix:

A. Terre Du Lac Association, Inc. v. Terre Du

Lac, Inc., 834 F.2d 148 (8th Cir. 1987) ...... A-1

B. Terre Du Lac Association, Inc. v. Terre Du

Lac, Inc., et al. (E.D. Mo. September 24,

ea a gga w eb eces sess A-6

C. Terre Du Lac Association, Inc. v. Terre Du

Lac, Inc., et al., Order Denying Rehearing... A-13

D. Statutory Provisions Involved 18 U.S.C. §

ee cet ibveses A-14

18 U.S.C. §§ 1961, 1962, 1964 ..... A-14,A-17,A-18

18 U.S.C. § 3575 (repealed, 1985) .......... A-19

iV

TABLE OF AUTHORITIES

Page

Sedima, S.P.R.L. v. Imrex Company, Inc., 473 U.S.

BORE Live Fond kuekaekeneedacnaneenes 4,5,6,7,8 10

Alexander Grant & Company v. Tiffany Industries,

MG., CPOE ae 107 Gale Cr. TGR) 2. cc cccccancnsn 5

Allright Missouri, Inc. v. Billeter, 829 F.2d 631 (8th

Oe PP ee a ee pee re re 6

Bank of America v. Touche Ross & Company, 782 F.2d

i I ye re 5

Barticheck v. Fidelity Union Bank/First National State,

Se Foe re Gc WT on en ws ks heaGe canes 5,9

Deviries v. Prudential-Bache Securities, Inc., 805 F.2d

Be ae NN naan kesed éoans eee aeeceaien: 6

H. J. Inc. v. Northwestern Bell Telephone Company,

829 F.2d 648 (8th Cir. 1987), cert. granted, 56

U.S.L.W. 3647 (March 31, 1988) ............... 5,6,9

Holmberg v. Morrisette, 800 F.2d 205 (8th Cir. 1986),

cert. denied, U.S.___, 107 S.Ct. 1953 (1987) 6

Henning v. First Bank of Worthington, No. 86-5320

Ge Gs BO Fa NEE 6 ook 0 hele oadceccacnaxehave 6

International Data Bank, Ltd. v. Zepkin, 812 F.2d 149

ST SEPELOG he tc adele hah ek ide oa ere 5

Madden v. Gluck, 815 F.2d 1163 (8th Cir. 1987), cert.

GEE, Te a ENF noc cceccksseeesinks 6

Morgan v. Bank of Waukegan, 804 F.2d 970 (7th Cir.

Pe eee ae ba See gee 5,8

Ornest v. Delaware North Companies, Inc., 818 F.2d

Pea, SUNOEL vec cc nous anaend wae ceawecees 6

Roeder v. Alpha Industries, Inc., 814 F.2d 22 (Ist Cir.

rere rr Perey yr rr ry rrr rer Ty 5,9

Sun Savings and Loan Ass’n. v. Dierdorff, 825 F.2d

SE, CTE a s's'6 is wade ne skeaGnaakinenne s 5,9

Superior Oil Company v. Fulmer, 785 F.2d 252 (8th Cir.

SD 52 aos ks oes waank saa tadeee ee eee ees 5,6

Terre Du Lac Ass’n., Inc. v. Terre Du Lac, Inc., 601

F.Supp. 257 (E.D. Mo. 1984), aff’d, in part, rev'd,

in part, 772 F.2d 467 (8th Cir. 1985), cert. denied,

SIRE es ccc wo bobo 056 050066303040 88405 090 3,4

Terre Du Lac Ass’n., Inc. v. Terre Du Lac, Inc., 834

woh Y fs By, Perrrrrrrer errr ye 4,6

Torwest DBC, Inc. v. Dick, 810 F.2d 925 (10th Cir.

i PPP PET TT TIPE OPO PEE rrr ETT Ty 8

United States v. Dean, 647 F.2d 779 (8th Cir. 1981),

cert. denied, 456 U.S. 1006 (1982)............... 5,10

United States v. lanniello, 808 F.2d 184 (2d Cir. 1986),

a ee, Bee ees BS 8 ek cbecaeennek es 5,9

United States v. Kragness, 830 F.2d 842 (8th Cir.

OPP TCT CTT TTT CC CRTC TTC Toor r ery 7

Northern Trust Banks/O’Hare v. Inryco, Inc., 615

F.Supp. S2B0N.D. TE. 1965) ... cc ccscrccccenas 8

RE rises ba duc kene ke eee eeete eras 2

eT ee ee oo chk dd 0b deed eredecieeee eee 2

eee EE ik dae da endear 2,4,7

See ee, SE aaa as ba oly RN ew ee 2,4,6,7

OE ee eS ee a oe ee rea sate ee 2,4

No.

IN THE

Supreme Court of the United States

OcToBer TERM, 1987

Terre Du Lac Association, IN«

Petitioner,

VS.

Terre Du Lac, Inc., Terre Du Lac Gort & COUNTRY

Cius, INc., Terre Du Lac Country CLUB ASSOCIATES,

a limited partnership, C.1.T. CORPORATION, SENSIBAR

ENTERPRISES, INC., Mo-ILt, Ltp., and James O. Kwon,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Petitioner, Terre Du Lac Association, Inc. respectfully re-

quests that a writ of certiorari issue to review the judgment and

opinion of the United States Court of Appeals for the Eighth

Circuit entered in this proceeding on December |, 1987.

ill

OPINIONS BELOW

The opinion of the United States Court of Appeals for the

Eighth Circuit is reported at 834 F.2d 148, and reprinted at pp.

A-1-S~of this Petition. The Order and the Opinion of the

District Court from which this appellate proceeding arises are

not reported, but are reprinted at pp. A-6-12 of this Petition.

1\

IL RISDICTION

STATUTORY PROVISIONS INVOLVED

VI

STATEMENT OF THE CASI

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Ihe Association commenced the action in the District Court

to secure relief from defendants’ conduct. The Association’s

Amended Complaint alleges, among other matters, that defen-

dants’ commission of mail fraud in the course of some 900

separate real estate transactions constituted a ‘‘pattern of

racketeering activity’? within the meaning of 18 U.S.C. § 1962,

and that it is entitled to relief pursuant to 18 U.S.C. § 1964. The

Association alleged that the District Court had jurisdiction pur-

suant to 28 U.S.C. § 1331 and 18 U.S.C. §§ 1964, 1965.

The District Court initially dismissed the Association’s RICO

claim for failure to allege that defendants had been convicted of

the predicate acts of racketeering activity alleged in the com-

plaint. Jerre Du Lac Association, Inc. v. Terre Du Lac, Inc.,

601 F.Supp. 257 (E.D. Mo. 1984). After that decision was

reversed in Jerre Du Lac Association, Inc. v. Terre Du Lac,

Inc., 772 F.2d 467 (8th Cir. 1985), cert. denied, 475 U.S. 1082

(1986), Respondents moved, pursuant to Rule 12(b)(6), Fed. R.

Civ. P., to dismiss the Association’s RICO claim a second time.

The District Court granted that motion and dismissed the

Association’s RICO claim. The District Court concluded that

no ‘*‘pattern of racketeering activity’’ could be found where the

predicate acts of racketeering activity occurred in the context of

a single scheme.

The U.S. Court of Appeals for the Eighth Circuit affirmed

the dismissal on those grounds. Jerre Du Lac Association, Inc.

v. Terre Du Lac, Inc., 834 F.2d 148 (8th Cir. 1987). In render-

ing its decision, the Court of Appeals reaffirmed its adherence

to a construction of RICO’s ‘‘pattern’’ requirement that is in-

consistent with this Court’s decision in Sedima S.P.R.L. v. Im-

rex Co., Inc., 473 U.S. 479 (1985) and has been rejected by a

clear majority of the Courts of Appeal that have considered the

question.

Vil

REASONS FOR ISSUANCE OF THE WRIT

A writ of certiorari should issue in this case because the rule

of decision adopted by the Court of Appeals conflicts with the

decision in Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479

(1985) and with decisions of the United States Court of Appeals

for the First, Second, Third, Fourth, Seventh, Ninth and

Eleventh Circuits.' Furthermore, issuance of the writ will avoid

the substantial injustice that would otherwise result if the Court

refused review in this case but, in deciding H. J., Inc. v. Nor-

thwestern Bell Telephone Company, No. 87-1252, cert. granted,

56 U.S.L.W. 3647 (March 21, 1988) rejects the rule of decision

which forms the basis for the Court of Appeals’ decision in the

present case.

A. The Eighth Circuit’s Present View Of A ‘‘Pattern Of

Racketeering Activity’? Conflicts With The Decision

In Sedima

In affirming the dismissal of Petitioner’s RICO claim in this

case, the Court of Appeals reiterated its present’ view that a pat-

See e.g., Barticheck v. Fidelity Union Bank/First National State,

832 F.2d 36 (3rd Cir. 1987); Sun Savings and Loan Ass’n vy. Dierdorff,

825 F.2d 187 (9th Cir. 1987); Roeder v. Alpha Industries, Inc., 814

F.2d 22 (1st Cir. 1987); /nternational Data Bank, Ltd. v. Zepkin, 812

F.2d 149 (4th Cir. 1987); United States v. lanniello, 808 F.2d 184 (2nd

Cir. 1986), cert. denied, 107 S.Ct. 3229; Morgan v. Bank of

Waukegan, 804 F.2d 970 (7th Cir. 1986); and Bank of America \.

Touche Ross & Co., 782 F.2d 966 (11th Cir. 1986).

> Prior to the decision in Superior Oil Company v. Fulmer, 785 F.2d

252 (8th Cir. 1986), the Court of Appeals adhered to the view that

multiple acts of racketeering activity committed pursuant to a single

scheme could form a pattern of racketeering activity. See e.g., United

States v. Dean, 647 F.2d 779 (8th Cir. 1981), cert. denied, 456 U.S.

1006 (1981); Alexander Grant & Company v. Tiffany Industries, Inc.,

770 F.2d 717, 718, n. 1 (8th Cir. 1985).

Dee yee

tern of racketeering activity cannot be found to have occurred

based on acts of racketeering activity committed pursuant to a

single scheme.’ Rather, according to the Court of Appeals,

‘*something more’’ than a single scheme must be present — e.g.

a similar scheme perpetrated by the same defendants at a dif-

ferent time or place. Jerre Du Lac Ass’n, Inc. v. Terre Du Lac,

Inc., 834 F.2d 148, 149-50 (8th Cir. 1987). This view of the

‘*pattern’’ requiremen. under RICO conflicts with both the ac-

tual holding of the Court in Sedima and the views which the

Court expressed in that case concerning the pattern requirement

under RICO.

In Sedima, the Court held that in order to recover under 18

U.S.C. § 1964(c), a plaintiff must demonstrate an injury con-

sisting of ‘‘the harm caused by predicate acts sufficiently related

to form a pattern... .’’ Sedima, S.P.R.L. v. Imrex Co., Inc.,

473 U.S. at 497 (emphasis supplied). The Court of Appeals’

view that a “‘pattern’’ cannot exist in the absence of multiple

criminal schemes, taken in conjuction with this holding in

Sedima, would mean that the remedy created by 18 U.S.C. §

1964(c) is available only to those rarest of persons who are

repeatedly victimized (probably unintentionally) by defendants’

criminal acts committed pursuant to separate schemes

’ This view was first enunciated by the Court of Appeals in Superior

Oil Company v. Fulmer, 785 F.2d 252 (8th Cir. 1986). Since that deci-

sion was rendered by a panel of the Court of Appeals, it has provided

the basis for rejecting every civil RICO claim reviewed by the Court of

Appeals. See Holmberg v. Morrisette, 800 F.2d 205 (8th Cir. 1986),

cert. denied, 107 S.Ct. 1953 (1987); Deviries v. Prudential-Bache

Securities, Inc., 805 F.2d 326 (8th Cir. 1986); Madden v. Gluck, 815

F.2d 1163 (8th Cir. 1987), cert. denied, 108 S.Ct. 86; Ornest v.

Delaware North Cos., 818 F.2d 651 (8th Cir. 1987); Henning v. First

Bank of Worthington, No. 86-5320 (8th Cir. July 7, 1987); H. J. Inc.

v. Northwestern Bell Telephone Company, 829 F.2d 648 (8th Cir.

1987), cert. granted, 56 U.S.L.W. 3647 (March 21, 1988); Allright v.

Billeter, 829 F.2d 631 (8th Cir. 1987).

a

ee a

wns. Se

perpetrated in disparate times and/or places.* Rather than

reading RICO broadly, as required by this Court and the statute

itself, Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. at 497-98,

the Court of Appeals for the Eighth Circuit has, as a practical

matter, read 18 U.S.C. § 1964(c) out of the statute.

The Court of Appeals’ view of RICO’s pattern requirement is

also inconsistent with the Court’s description of the pattern re-

quirement in Sedima. Under the views expressed in Sedima, a

pattern of racketeering activity within the meaning of 18 U.S.C.

§ 1962 may exist when there have been two or more acts of

racketeering activity, committed within ten years of each other,

that have the same or similar purposes, results, par-

ticipants, victims, or methods of commission, or otherwise

are interrelated by distinguishing characteristics and are

not isolated events.

Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. at 496, n. 14.°

The Eighth Circuit’s ‘‘pattern’’ requirement applied in this case

— that the pattern of racketeering activity consist of separate

schemes — clearly conflicts with these views, because it requires

a conclusion that (a) there is no particular relationship between

the schemes or (b) that defendants’ conduct lacks temporal con-

tinuity.°

* In the context of the scheme involved in this case, a remedy under

18 U.S.C. § 1964(c) would be available only if defendants had

marketed lots in another development based on a similar fraudulent

scheme. Even then, the remedy would extend only to the unlucky per-

son(s) who bought lots in each of the different developments.

* Justice Powell’s dissenting opinion goes even further, at least im-

plying that the predicate acts should ‘‘be part of some common

scheme’’. Sedima, 473 U.S. at 528 (Powell, J., dissenting).

* Cf. United States v. Kragness, 830 F.2d 842 (8th Cir. 1987) (multiple

schemes perpetrated by groups of defendants having some common

members).

—

Accordingly, the Court should issue its writ to ensure confor-

mity between its decision in Sedima and the decisions of the

Court of Appeals for the Eighth Circuit in cases arising under

RICO.

B. The Decision Below Conflicts With Decisions From

Other Circuits

With the exception of a single decision by the U.S. Court of

Appeals for the Tenth Circuit’, each of the Courts of Appeals

that has considered the ‘‘multiple scheme’’ requirement

adopted by the Eighth Circuit and applied in this case has re-

jected the requirement.

The first court of appeals to reject expressly the ‘‘multiple

scheme’’ requirement after this Court’s decision in Sedima was

the Court of Appeals for the Seventh Circuit (the circuit in

which the concept was first developed). In Morgan v. Bank of

Waukegan, 804 F.2d 970 (7th Cir. 1986), the court observed -

that if the ‘‘multiple scheme’’ requirement were adopted as a

general rule, the result would be ‘‘untenable’’: ‘‘defendants

who commit a large and ongoing scheme [such as the scheme in

this case], albeit a single scheme, would automatically escape

RICO liability for their acts.’” Morgan v. Bank of Waulegan,

804 F.2d at 975.

The issue was subsequently raised in a case pending before the

Court of Appeals for the Second Circuit. That court analyzed

the statute and concluded that ‘‘forcing’’ a multiple scheme re-

quirement, as had the Eighth Circuit, ‘‘from the word ‘pattern’

’ Torwest DBC, Inc. v. Dick, 810 F.2d 925 (10th Cir. 1987).

* See Northern Trust Bank/O’Hare vy. Inryco, Inc., 615 F.Supp.

828, 833 (N.D. Ill. 1985).

ma ee

is a strained and inappropriate reading of the statutory

language.’’ United States v. lanniello, 808 F.2d 184, 192 (2d

Cir. 1986).

The Court of Appeals for the Ninth Circuit rejected the

multiple scheme requirement for similar reasons. As that court

stated:

RICO requires repeated acts, not repeated activity. Thus,

if a defendant commits two or more predicate acts that are

not isolated events, are separate in time, and are in fur-

therance of a single criminal scheme, then RICO’s pattern

requirement is satisfied.

Sun Savings and Loan Ass’n v. Dierdorff, 825 F.2d 187 at 193

(9th Cir. 1987) (emphasis in original).

Other circuits have also rejected the multiple scheme require-

ment in whole or in part. See Roeder v. Alpha Industries, Inc..,

814 F.2d 22, 31 (Ist Cir. 1987); Barticheck v. Fidelity Union

Bank/First National State, 832 F.2d 36, 39 (3rd Cir. 1987).

Thus, as this Court apparently recognized when granting the

petition for certiorari in H. J. Inc. v. Northwestern Bell

Telephone Company, No. 87-1252, 56 U.S.L.W. 3647 (March

21, 1988), there is a clear split of authority among the circuit

courts of appeal which should be resolved by this Court.

C. It Would Be Manifestly Unjust To Reject The

Association’s Petition, In Light Of The Issuance Of

The Writ In H. J. Inc.

In light of the fact that the Court has, apparently, undertaken

to resolve the split of authority between the decisions of the

Court of Appeals for the Eighth Circuit, and the decisions of

other Courts of Appeals, see H. J. Inc. v. Northwestern Bell

Telephone Company, No. 87-1252, cert. granted 56 U.S.L.W.

3657, the Court should issue its writ in this case in order to

assure that the Association’s RICO claim is not disposed of on

the basis of a rule of decision that is subsequently rejected by

this Court. To do otherwise would result in manifest injustice

to the Association.

Vill

CONCLUSION

The Court of Appeals for the Eighth Circuit initially paved

the way for a reasoned construction of the pattern requirement

under RICO with its decision in United States v. Dean, 647 F.2d

779 (8th Cir. 1981). Apparently in the interest of restraining the

use Of a disfavored remedy by the judiciary but mandated by

Congress, the Court of Appeals has now abandoned that

reasoned construction. In its place, the Eighth Circuit has

adopted a construction of RICO’s pattern requirement that is at

odds with both the construction suggested by this Court’s deci-

sion in Sedima and the construction adopted by the majority of

the other circuit court of appeals. The Court should issue its

writ in this case in order to reestablish a consistent, reasoned

construction of RICO’s pattern requirement throughout the

judicial circuits.

Respectfully submitted,

Kenton E. Knickmeyer

One Mercantile Center

Suite 3400

St. Louis, Missouri 63101

(314) 231-7676

Counsel for Petitioner

Terre Du Lac Association, Inc.

APPENDIX

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 87-1222

Terre Du Lac Association, Inc., a not-for-profit corporation,

Appellant,

Vv.

Terre Du Lac, Inc.;

Appellee,

Terre Du Lac Utilities Corp., Terre Du Lac Golf and

Country Club, Inc.; Terre Du Lac Country Club Association, a

limited partnership; CIT Corporation; Sensibar Enterprises,

Inc.; Moill, Ltd.; James O. Kwon,

Appellees.

Appeal from the United States District Court for the

Eastern District of Missouri.

Submitted: October 13, 1987

Filed: December 1, 1987

Before ARNOLD, Circuit Judge, HENLEY, Senior Circuit

Judge, and BOWMAN, Circuit Judge.

BOWMAN, Circuit Judge.

~~ < =

Terre Du Lac Association, Inc., appeals from an order

entered by the District Court' dismissing the Association’s

Racketeer Influenced and Corrupt Organizations Act (RICO)

claim against the defendants. We affirm the District Court’s

order. ;

This case involves an action filed by Terre Du Lac Associa-

tion, Inc., a property owners’ association, against Terre Du

Lac, Inc. and other alleged developers of the Terre Du Lac sub-

division. The subdivision is a private recreational land develop-

ment locaied in southeastern Missouri. This is the second time

the case has been before us. See Terre Du Lac Ass’n v. Terre

Du Lac, Inc. , 772 F.2d 467 (8th Cir. 1985) (reversing the District

Court’s dismissal of the Association’s RICO count), cert.

denied, 106 S.Ct. 1460-61 (1986).

The Association alleges that defendants violated Sections

1962{a) and 1962(c) of the RICO statute by failing to fulfill their

promises and representations relating to the paving of roads, the

completion of the sewage and water systems, and the use and

transfer of subdivision amenities. The claim is based upon

predicate acts of mail fraud, see 18 U.S.C. §§ 1341, 1961(1)(B),

and seeks equitable relief pursuant to Section 1964(a) of the

Act.?

The District Court granted defendants’ original motions to

dismiss the RICO claim on the basis that ‘‘none of th[e] defen-

dants ha[d] been convicted of any of the alleged predicate acts

' The Honorable William L. Hungate, United States District Judge for

the Eastern District of Missouri.

* The Association’s complaint included sixteen counts. The District

Court has dismissed every count and has entered its final judgment.

This appeal concerns only the Association’s RICO claim.

ao A.3} —

of mail fraud.’’ Terre Du Lac Ass'n v. Terre Du Lac, Inc., 001

F.Supp. 257, 261 (E.D. Mo. 1984). The Court relied upon

Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482 (2nd Cir. 1984),

rev'd, 473 U.S. 479 (1985), in which the Second Circuit deter-

mined that a criminal conviction of a predicate act must precede

a private civil suit under RICO.

Subsequent to the District Court’s ruling, the Supreme Court

reversed the Second Circuit’s decision in Sedima. The Supreme

Court held that a RICO action may proceed without a criminal

conviction of a predicate act. Sedima, 473 U.S. at 488-93. In

view of this holding, this Court found, on appeal, that ‘‘a rever-

sal of the district court’s dismissal of the RICO count [was] re-

quired, unless some other fatal defect in the complaint

existfed].’’ Terre Du Lac Ass'n, 772 F.2d at 472.’

After the Supreme Court denied certiorari in 1986, defen-

dants once again moved to dismiss the Association’s RICO

claim. The District Court granted this motion. The court held

that the Association had not shown a pattern of racketeering ac-

tivity because it had alleged only a single fraudulent scheme.

Terre Du Lac Ass'n v. Terre Du Lac, Inc., No. 83-2577C(3),

slip op. at 2-5 (E.D. Mo. Sept. 24, 1986). Further, the District

Court held that the ‘‘law of the case’’ doctrine did not foreclose

the dismissal since the ‘‘pattern of racketeering activity’’ issue

had not been presented or decided in the prior appeal. /d. at 5-6.

The Association appeals these rulings.

Under the prior decisions of this Court, it is clear that the

Association has failed to state a RICO claim. To establish a

claim under RICO there must be ‘‘(1) conduct (2) of an enter-

prise (3) through a pattern (4) of racketeering activity.’’ Sedima,

473 U.S. at 496 (footnote omitted). Following the Supreme

’ The defendants argued in that appeal that such a defect did exist in

that the complaint failed to allege sufficient facts supporting the

Association’s standing to pursue the RICO count. The Court rejected

this claim. Jerre Du Lac Ass’n, 772 F.2d at 472-73.

=

Court’s decision in Sedima, we held in Superior Oil Co. v.

Fulmer, 785 F.2d 252 (8th Cir. 1986) that something more than

a single scheme is required in order to establish a pattern of

racketeering activity. Jd. at 257. In subsequent cases, we have

consistently upheld this requirement. See e.g., United States v.

Kragness, Nos. 86-5087 to -5091, slip op. at 26-28 (8th Cir. Sept.

28, 1987) (to be reported at: 830 F.2d 842); H. J. Inc. v. Nor-

thwestern Beil Tel. Co., No. 87-5121, slip op. at 2-4 (8th Cir.

Sept. 22, 1987) (to be reported at: 829 F.2d 648); Allright Mo..,

Inc. v. Billeter, Nos. 86-1476 & 1537, slip op. at 17-19 (8th Cir.

Sept. 16, 1987) (to be reported at: 829 F.2d 631); Ornest v.

Delaware N. Cos., 818 F.2d 651, 652 (8th Cir. 1987); Madden v.

Gluck, 815 F.2d 1163, 1164 (8th Cir.), cert. denied, 108 S.Ct. 86

(1987); Deviries v. Prudential-Bache Securities, Inc., 805 F.2d

326, 329 (8th Cir. 1986); Holmberg v. Morrisette, 800 F.2d 205,

209-10 (8th Cir. 1986), cert. denied, 107 S.Ct. 1953 (1987).

Here, the District Court concluded, and the Association does

not contest, that the alleged predicate acts of mail fraud con-

stitute parts of a single allegedly fraudulent scheme to market

Terre Du Lac property. There are no allegations that defen-

dants have engaged in similar activities in the past or that they

are engaged in similar fraudulent activities elsewhere.

Therefore, we hold that under the rule of Superior Oil and its

progency the Association’s RICO claim was properly dismissed.

Further, we agree with the District Court that the “‘law of the

case’’ doctrine does not bar the dismissal of the Association’s

RICO claim. In the first appeal, this Court did not consider the

‘*nattern of racketeering activiiy’’ issue. ‘‘[T]he law of the case

established by a prior appeal does not extend to preclude con-

sideration of issues not presented or decided on the prior ap-

peal.’’ Conway v. Chemical Leaman Tank Lines, 644 F.2d

1059, 1062 (Sth Cir. 1981). See also Kuhn v. National Ass’n of

Letter Carriers, Branch 5, 570 F.2d 757, 759 n.3 (8th Cir. 1978).

se eee

Since the Association’s RICO claim must fail because of the

pattern requirement established in Superior Oil, we need not ad-

dress defendants’ alternative arguments. The decision of the

District Court is affirmed.

A true copy.

Attest:

Clerk, U.S. Court Of Appeals, Eighth Circuit.

ay

APPENDIX B

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

No. 83-2577C(3)

Terre Du Lac Association, Inc.,

Plaintiff,

ie

Terre Du Lac, Inc., et al.,

Defendants.

ORDER

(Filed Sept. 24, 1986)

A memorandum dated this day is hereby incorporated into

and made a part of this order.

IT IS HEREBY ORDERED that the renewed motion to

dismiss of defendants Terre du Lac Golf and Country Club,

Terre du Lac Country Club Association, Sensibar Enterprises,

Inc., and MO-ILL, Inc., and the motions to dismiss of defen-

dants Terre du Lac, Inc., and James O. Kwon and C.I.T. Cor-

poration be and the same are granted only insofar as they seek

dismissal of Count Fifteen of plaintiff’s complaint. The mo-

tions are denied in all other respects.

IT IS HEREBY FURTHER ORDERED defendants Terre du

Lac, Inc., and Kwon be and the same are granted leave to file

their counterclaims.

IT IS HEREBY FURTHER ORDERED that plaintiff’s mo-

tion to strike counterclaims be and the same is denied.

Dated this 24th day of September, 1986.

/s/ William L. Hungate

United States District Judge

a

eo

UNITED STATES DIS1tRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

No. 83-2577C(3)

Terre Du Lac Association, Inc.,

Plaintiff,

Vv.

Terre Du Lac, Inc., et al.,

Defendants.

MEMORANDUM

(Filed Sept. 24, 1986)

This matter is before the Court on plaintiff’s motion to strike

counterclaims, and motions to dismiss filed by various defen-

dants.

Plaintiff filed this case on November 8, 1983, alleging sixteen

counts against defendants. Counts One through Six were based

upon the Interstate and Land Sales Full Disclosure Act, 15

U.S.C. §§ 1701-1720. Counts Seven through Fourteen were

based on pendent state law claims. Count Fifteen was based

upon the Racketeer Influenced and Corrupt Organizations Act

(RICO), 18 U.S.C. §§ 1961-1968, and Count Sixteen was based

on the Sherman Antitrust Act, 15 U.S.C. §§ 1-7.

On August 31, 1984, the Court granted defendants’ motions

to dismiss all counts of plaintiff’s complaint. Terre du Lac

Association, Inc. v. Terre du Lac, Inc., 601 F.Supp. 257, 262

(E.D. Mo. 1984). On appeal, the Eighth Circuit affirmed the

dismissal of the Land Sales Act counts, but reversed the

dismissal of the RICO and antitrust counts, and vacated the

dismissal of the pendent state claims. Terre du Lac Association,

Inc. v. Terre du Lac, Inc., 772 F.2d 467, 475 (8th Cir. 1985). On

March 24, 1986, the United States Supreme Court denied all

initia aeetanenaieneiemnteeni tie

ae

parties’ applications for writ of certiorari. /d., 106 S.Ct. 1460,

1461 (1986).

On April 10, 1986, the Court dismissed the pendent state

claims at plaintiff’s request. Thus, the only counts remaining in

plaintiff’s complaint are Count Fifteen, the RICO claim, and

Count Sixteen, the antitrust claim.

Plaintiff’s RICO claim will be dismissed. In this count, plain-

tiff, a property owner’s association, alleges that defendants,

developers of the Terre du Lac subdivision, violated § 1962(a)

and (c) by failing to fulfill promises relating to the paving of

roads, the completion of sewage and water systems, and the use

and transfer of subdivision amenities. Plaintiff bases this claim

on predicate acts of mail fraud and seeks equitable relief pur-

suant to § 1964 of RICO.

The Court originally dismissed this count because none of the

defendants were convicted of the predicate acts of mail fraud.

Terre du Lac, supra, 601 F.Supp. at 261. The Court relied on

Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482 (2d Cir. 1984) for

its action. The Supreme Court, however, later reversed the Se-

cond Circuit and held that a RICO claim may proceed without a

criminal conviction of a predicate act. Sedima, S.P.R.L. v. Im-

rex co., 105 S.Ct. 3275 (1985). Accordingly, the Eighth Circuit

reversed this Court’s decision.

In Sedima, the Supreme Court determined that a violation of

§ 1962(c) requires (1) conduct (2) of an enterprise (3) through a

pattern (4) of racketeering activity. Sedima, supra, 105 S.Ct. at

3285. Defendants now contend that plaintiff has not alleged a

pattern of racketeering activity.'. This Court agrees.

' Although plaintiff asserts its RICO claim under § 1962(a) as well

as § 1962(c), the former section also requires a pattern of racketeering

activity. Superior Oil Co. v. Fulmer, 785 F.2d 252, 255 n.1 (8th Cir.

1986).

—

A pattern of racketeering activity requires more than one

fraudulent scheme. This concept has evolved from Sedima and

its progeny. In Sedima, the Supreme Court suggested that the

‘*pattern’’ element of a RICO violation requires evidence of

criminal conduct characterized by ‘‘continuity plus

relationship.’’ Id. at 3285 n.14. This two-prong ‘‘pattern’’ test

was recently applied by the Eighth Circuit in Superior Oil Co. v.

Fulmer, 785 F.2d 252 (8th Cir. 1986). The Court there found

that Superior Oil had proven the ‘‘relationship prong’’ by show-

ing that defendants committed several related acts of wire fraud

in pursuit of their conversion or theft of gas from Superior’s in-

terstate pipeline. Superior, however, failed to prove ‘‘continui-

ty’’ because defendants’ actions

comprised one continuing scheme to convert gas from

Superior Oil’s pipeline. There was no proof that [defen-

dants] had ever done these activities in the past and there

was no proof that they were engaged in other criminal ac-

tivities elsewhere.

Id. at 257. The Eighth Circuit cited with approval similar post-

Sedima opinions in which district courts dismissed RICO claims

for failure to allege more than one fraudulent scheme. /d. at

257-58 n.8.?

Plaintiff argues that Superior Oil does not require that

more than one fraudulent scheme be shown in order to prove a

pattern of racketeering activity. In support of this claim, plain-

tiff points to the Eighth Circuit’s citation to a portion of Justice

Powell’s dissenting opinion in Sedima. Superior Oil, supra at

256-57.

> This district recently rendered several similar decisions. Madden v.

Bluck, 636 F.Supp. 463 (E.D. Mo. 1986); Clodfelter v. Thurston, 637

F.Supp. 1034 (E.D. Mo. 1986); Allright Missouri, Inc. v. Billeter, 631

F.Supp. 1328 (E.D. Mo. 19.4).

— A-10 —

The Court is not persuaded by plaintiff’s argument that a

single fraudulent scheme is sufficient to invoke the effect of the

RICO statute. The Eighth Circuit has explicitly set forth the

essential elements necessary to meet RICO’s ‘‘pattern’’ require-

ment. That court cited with favor cases in which a single

scheme, encompassing multiple acts of mail or wire fraud, oc-

curring Over a long period of time, was held-not sufficent to

establish the pattern of racketeering activity necessary for pur-

poses of 18 U.S.C. § 1962. The RICO statute and its construc-

tion as first applied in the Seventh Circuit, see Schacht vy.

Brown, 711 F.2d 1343 (7th Cir. 1983), cert. denied, 464 U.S.

1002 (1983), has evoked a flurry of scholarly essays — not all

favorable. See generally Goldsmith and Keith, Civil RICO

Abuse: The Allegations in Context, 1986 Brigham Young

University Law Review 55; Burnett, Federal Civil RICO: Essen-

tial Reforms Necessary to Achieve Balanced Federalism Bet-

ween Federal and State Courts and the Efficient Administration

of Justice, 33 Fed. BN & J 200 (1986); Cole and McNamara,

Civil RICO After Sedima, 12 Litigation J. of the Section of

Litigation A.B.A. 24 (1986). Efforts to cut the garment to fit

the cloth come from savants academicians and trial practi-

tioners.

Here, plaintiff has not shown a pattern of racketeering activi-

ty because it has alleged only a single fraudulent scheme. In its

memorandum opposing defendants’ motions, plaintiff admits

this finding by characterizing its RICO claim as:

based upon separate frauds perpetrated upon as many as

3400 individuals over a decade, the combined effect of

which has been to result in injury [to plaintiff]. The frauds

were related, in that they were perpetrated as part of a

common scheme to market lots in the Terre Du Lac

development.

The Court concludes that the alleged predicate acts of mail

fraud constitute parts of one fraudulent scheme to market Terre

ATO A hae ee

Ali —

du Lac lots. Plaintiff does not allege that defendants have done

these activities in the past or that they were engaged in other

criminal activity elsewhere. Consequently, plaintiff fails to

state a viable RICO claim.

The Court is not foreclosed from dismissing plaintiff's RICO

count by the ‘‘law of the case’’ doctrine. Plaintiff argues that

the Eighth Circuit has ruled that this count states a claim for

relief and that this ruling establishes the law of the case that

must be followed in all subsequent proceedings. As defendants

correctly argue, however, the ‘‘law of the case’’ doctrine is not

an absolute bar to lower court reconsideration. Lehrman v.

Gulf Oil Corp., 500 F.2d 659, 663 (Sth Cir.), cert. denied, 420

U.S. 929 (1974). Moreover, the doctrine is inapplicable to issues

not presented or decided on prior appeal. Conway v. Chemical

Leaman Tank Lines, Inc., 644 F.2d 1059, 1062 (Sth Cir. 1981).

The Eight Circuit did not consider whether plaintiff had alleged

a pattern of racketeering activity.

Plaintiff’s antitrust claim will not be dismissed. Plaintiff

alleges that defendants charge lot owners a $3,000 initiation fee

to join the Terre du Lac Golf and Country Club if they purchas-

ed their lots from persons other than defendants, but offer free

club memberships to those who buy lots from defendants.

Plaintiff contends this conduct is a per se violation of § 1 of the

Sherman Act and seeks injunctive relief pursuant to 15 U.S.C. §

26.

Defendants argue that plaintiff’s antitrust claim (1) is unsup-

ported by fact; (2) is barred by res judicata; (3) insufficiently

pleads the essential elements of the alter ego doctrine against

defendants Terre du Lac Country Club Association, Sensibar

Enterprises, Inc., and MO-ILL, Inc.; and (4) fails to plead

fraud with particularity under Fed. R. Civ. P. 9(b).

Each of defendants’ arguments is unpersuasive at this junc-

ture. Viewing the complaint in the light most favorable to plain-

tiff, the Court finds that plaintiff may prove facts in support of

— A-12 —

its claim that would entitle it to relief. See Coniey v. Gibson,

355 U.S. 41, 45-46 (1957). Moreover, the Court concludes that

plaintiff’s antitrust claim is sufficiently pleaded and is not bar-

red by res judicata.

Plaintiff’s motion to strike counterclaims will be denied. On

April 30, 1986, defendants Terre du Lac, Inc., and James O.

Kwon filed as separate documents their answer, counterclaims,

and motion to dismiss. On May 22, 1986, plaintiff filed the ins-

tant motion, arguing, in essence, that even though the answer

and counterclaims were filed on the same day, they cannot be

filed as separate documents without leave of court under Fed.

R. Civ. P. 7(a) and 13(f). Plaintiff cites no cases in support of

its argument.

Upon careful consideration, the Court determines the

counterclaims should have been set forth in the defendants’

answers, see Fed. R. Civ. P. 7(a), 13(a), 13(b), 13(f); Jn re

Cessna Distributorship Antitrust Litigation, 532 F.2d 64, 67 n.7

(8th Cir. 1976) (discussing cross-claim), cert. denied, 423 U.S.

947 (1977). The Court will now grant defendants Terre du Lac,

Inc., and Kwon leave to file their counterclaims as presently fil-

ed.

Dated this 24th day of September, 1986.

_/s/ William L. Hungate

United States District Judge

— A-13 —

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 87-1222-EM

Terre Du Lac Association, Inc., etc.,

Appellant,

Vv.

Terre Du Lac Golf and Country Club, et al.,

Appellees.

Appeal form the United States District Court for the

Eastern District of Missouri

Appellant’s petition for rehearing en banc has been con-

sidered by the Court and is denied.

Petition for rehearing by the panel is also denied.

January 22, 1988 as

Order Entered at the Direction of the Court:

/s/ Robert D. St. Vrain

Clerk, United States Court of Appeals, Eighth Circuit

A-14

APPENDIX D

STATUTES INVOLVED

18 U.S.C. § 1341. Frauds and swindles

Whoever, having devised or intending to devise any scheme o1

artifice to defraud, or for obtaining money or property by

means of false or fraudulent pretenses, representations, or pro-

mises, or to sell, dispose of, loan, exchange, alter, give away,

distribute, supply, or furnish or procure for unlawful use any

counterfeit or spurious coin, obligation, security, or other arti-

cle, or anything represented to be or intimated or held out to be

such counterfeit or spurious article, for the purpose of ex-

ecuting such scheme or artifice or attempting so to do, places in

any post office or authorized depository for mail matter, any

matter or thing whatever to be sent or delivered by the Postal

Service, or takes or receives therefrom, any such matter or

thing, or knowingly causes to be delivered by mail according to

the direction thereon, or at the place at which it is directed to be

delivered by the person to whom it is addressed, any such matter

or thing, shall be fined not more than $1,000 or imprisoned not

more than five years, or both.

18 U.S.C. § 1961. Definitions

As used in this chapter —

(1) ‘‘racketeering activity’’ means (A) any act or threat in-

volving murder, kidnapping, gambling, arson, robbery,

bribery, extortion, dealing in obscene matter, or dealing in nar-

cotic or other dangerous drugs, which is chargeable under State

law and punishable by imprisonment for more than one year;

(B) any act which is indictable under any of the following provi-

sions of title 18, United States Code: Section 201 (relating to

bribery), section 224 (relating to sports bribery), sections 471,

472 and 473 (relating to counterfeiting), section 659 (relating to

theft from interstate shipment) if the act indictable under sec-

tion 659 is felonious, section 664 (relating to embezzelement

em ee ae

ee

.

— fi$ —

from pension and welfare funds), section 891-894 (relating to

extortionate credit transactions), section 1084 (relating to the

transmission of gambling information), section 1341 (relating to

mail fraud), section 1343 (relating to wire fraud), sections

1461-1465 (relating to obscene matter), section 1503 (relating to

obstruction of justice), section 1510 (relating to obstruction of

criminal investigations}, section 1511 (relating to the obstruc-

tion of State or local law enforcement), section 1512 (relating to

tampering with a witness, victim or an informant), section 1513

(relating to retaliating against a witness, victim or informant),

section 1951 (relating to interference with commerce, robbery,

or extortion), section 1952 (relating to rackc.eering), section

1953 (relating to interstate transportation of wagering parapher-

nalia), section 1954 (relating to unlawful welfare fund

payments), section 1955 (relating to the prohibition of illegal

gambling businesses), section 1957 (relating to engaging in

monetary transactions in property derived from specified

unlawful activity), sections 2312 and 2313 (relating to interstate

transportation of stolen motor vehicles), sections 2314 and 2315

(relating to interstate transportation of stolen property), section

2320 (relating to trafficking in certain motor vehicles or motor

vehicle parts), sections 2341-2346 (relating to trafficking in con-

traband cigarettes), sections 2421-24 (relating to white slave

traffic), (C) any act which is indictable under title 29, United

States Code, section 186 (dealing with restrictions on payments

and loans to labor organizations) or section 501(c) (relating to

embezzelment from union funds), (D) any offense involving

fraud connected with a case under title 11, fraud in the sale of

securities, or the felonious manufacture, importation, receiving,

concealment, buying, selling, or otherwise dealing in narcotic or

other dangerous drugs, punishable under any law of the United

States, or (E) any act which is indictable under the Currency and

Foreign Transactions Reporting Act;

(2) *‘State’’ means any State of the United States, the District of

Columbia, the Commonwealth of Puerto Rico, any territory or

possession of the United States, any political subdivision, or any

department, agency, or instrumentality thereof;

— A-16 —

(3) ‘‘person’’ includes any individual or entity capable of

holding a legal or beneficial interest in property:

(4) ‘‘enterprise’’ includes any individual, partnership, corpora-

tion, association, or other legal entity, and any union or group

of individuals associated in fact although not a legal entity;

(5) ‘‘pattern of racketeering activity’’ requires at least two acts

of racketeering activity, one of which occurred after the effec-

tive date of this chapter and the last of which occurred within

ten years (excluding any period of imprisonment) after the com-

mission of a prior act of racketeering activity;

(6) ‘unlawful debt’’ means a debt (A) incurred or contracted in

gambling activity which was in violation of the law of the

United States, a State or political subdivision thereof, or which

is unenforceable under State or Federal law in whole or in part

as to principal or interest because of the laws relating to usury,

and (B) which was incurred in connection with the business of

gambling in violation of the law of the United States, a State or

political subdivision thereof, or the business of lending money

or a thing of value at a rate usurious under State or Federal law,

where the usurious rate is at least twice the enforceable rate;

(7) ‘racketeering investigator’’ means any attorney or in-

vestigator so designated by the Attorney General and charged

with the duty of enforcing or carrying into effect this chapter;

(8) ‘‘racketeering investigation’’ means any inquiry conducted

by any racketeering investigator for the purpose of ascertaining

whether any person has been involved in any violation of this

chapter or of any final order, judgment, or decree of any court

of the United States, duly entered in any case or proceeding aris-

ing under this chapter;

(9) ‘‘documentary material’’ includes any book, paper, docu-

ment, record, recording, or other material; and

~- Al? —

(10) *‘Attorney General’’ includes the Attorney General of the

United States, the Deputy Attorney General of the United

States, any Assistant Attorney General of the United States, or

any employee of the Department of Justice or any employee of

any department or agency of the United States so designated by

the Attorney General to carry out the powers conferred on the

Attorney General by this chapter. Any department or agency so

designated may use in investigations authorized by this chapter

either the investigative provisions of this chapter or the in-

vestigative power of such department or agency otherwise con-

ferred by law.

18 U.S.C. § 1962. Prohibited activities

(a) It shall be unlawful for any person who has received any in-

come derived, directly or indirectly, from a pattern of racketeer-

ing activity or through collection of an unlawful debt in which

such person has participated as a principal within the meaning

of section 2, title 18, United States Code, to use or invest,

directly or indirectly, any part of such income, or the proceeds

of such income, in aquisition of any interest in, or the establish-

ment Or operation of, any enterprise which is engaged in, or the

activities of which affect, interstate or foreign commerce. A

purchase of securities on the open market for purposes of in-

vestment, and without the intention of controlling or par-

ticipating in the control of the issuer, or of assisting another to

do so, shall not be unlawful under this subsection if the

securities of the issuer held by the purchaser, the members of his

immediate family, and his or their accomplices in any pattern or

racketeering activity or the collection of an unlawful debt after

such purchase do not amount in the aggregate to one percent of

the outstanding securities of any one class, and do not confer,

either in law or in fact, the power to elect one or more directors

of the issuer.

(b) It shall be unlawful for any person through a pattern of

racketeering activity or through collection of an unlawful debt

me

tO acquire or maintain, directly or indirectly, any interest in or

control of any enterprise which is engaged in, or the activities of

which affect, interstate or foreign commerce.

(c) 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 par-

ticipate, directly or indirectly, in the conduct of such

enterprise’s affairs through a pattern of racketeering activity or

collection of unlawful debt.

(d) It shall be unlawful for any person to conspire to violate any

of the provisions of subsections (a), (b), or (c) of this section.

18 U.S.C. § 1964. Civil remedies

(a) The district courts of the United States shall have jurisdic-

tion to prevent and restain violations of section 1962 of this

chapter by issuing appropriate orders, including, but not limited

to: ordering any person to divest himself of any interest, direct

or indirect, in any enterprise; imposing reasonable restrictions

on the future activities or investments of any person, including,

but not limited to, prohibiting any person from engaging in the

Same type of endeavor as the enterprise engaged in, the activities

of which affect interstate or foreign commerce; or ordering

dissolution or reorganization of any enterprise, making due pro-

vision for the rights of innocent persons.

(b) The Attorney General may institute proceedings under this

section. Pending final determination thereof, the court may at

any time enter such restraining orders or prohibitions, or take

such other actions, including the acceptance of satisfactory per-

formance bonds, as it shall deem proper.

(c) 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 he sustains and the cost of the suit, in-

cluding a reasonable attorney’s fee.

<--1

(d) A final judgment or decree rendered in favor of the United

States in any criminal proceeding brought by the United States

under this chapter shall estop the defendant from denying the

essential allegations of the criminal offense in any subsequent

civil proceding brought by the United States.

18 U.S.C. § 3575. Increased sentence for special offenders

(e) A defendant is a special offender for purposes of this section

if —

(1) the defendant has previously been convicted in courts

of the United States, a State, the District of Columbia, the —_

Com;monwealth of Puerto Rico, a territory or possession

of the United States, any political subdivision, or any

department, agency, or instrumentality thereof for two or

more offenses committed on occasions different from one

another and from such felony and punishable in such

courts by death or imprisonment in excess of one year, for

one or more of such convictions the defendant has been

imprisoned prior to the commission of such felony, and

less than five years have elapsed between the commission

of such felony and either the defendant’s release, on parole

or otherwise, from imprisonment for one such conviction

or his commission of the last such previous offense or

another offense punishable by death or imprisonment in

excess Of one year under applicable laws of the United

States, a State, the District of Columbia, the Com-

monwealth of Puerto Rico, a territory or possession of the

United States, any political subdivision, or any depart-

ment, agency or instrumentality thereof; or

(2) the defendant committed such felony as part of a pat-

tern of conduct which was criminal under applicable laws

of any jurisdiction, which constituted a substantial source

of his income, and in which he manifested special skill or

expertise; or

— A-20 —

(3) such felony was, or the defendant committed such

felony in furtherance of, a conspiracy with three or more

other persons to engage in a pattern of conduct criminal

under applicable laws of any jurisdiction, and the defen-

dant did, or agreed that he would, initiate, organize, plan,

finance, direct, manage, or supervise all or part of such

conspiracy or conduct, or give or receive a bribe or use

force as all or part of such conduct.

A conviction shown on direct or collateral review or at the hear-

ing to be invalid or for which the defendant has been pardoned

on the ground of innocence shall be disregarded for purposes of

paragraph (1) of this subsection. In support of findings under

paragraph (2) of this subsection, it may be shown that the

defendant has had in his own name or under his control income

or property not explained as derived from a source other than

such conduct. For purposes of paragraph (2) of this subsection,

a substantial source of income means a source of income which

for any period of one year or more exceeds the minimum wage,

determined on the basis of a forty-hour week and a fifty-week

year, without reference to exceptions, under section 6(a)(1) of

the Fair Labor Standards Act of 1938 (52 Stat. 1602, as amend-

ed 80 Stat. 838), and as hereafter amended, for an employee

engaged in commerce or in the production of goods for com-

merce, and which for the same period exceeds fifty percent of

the defendant’s declared adjusted gross income under section 62

of the Internal Revenue Act of 1954 (68A Stat. 17, as amended

83 Stat. 655), and as hereafter amended. For purposes of

paragraph (2) of this subsection, special skill or expertise in

criminal conduct includes unusual knowledge, judgment or

ability, including manual dexterity, facilitating the initiation,

organizing, planning, financing, direction, management, super-

vision, execution or concealment of criminal conduct, the enlist-

ment of accomplices in such conduct, the escape from detection

or apprehension for such conduct, or the disposition of the

fruits or proceeds of such conduct. For purposes of paragraphs

eg eT ee ee ae ee ee

ee ee a

— A-21 —

(2) and (3) of this subsection, criminal conduct forms a pattern

if it embraces criminal acts that have the same or similar pur-

poses, results, participants, victims, or methods of commission,

or otherwise are interrelated by distinguishing characteristics

and are not isolated events.