The NAM filed an amicus brief on 8/13/07, asking the Supreme Court to decide once and for all whether an “enterprise,” as defined under the Racketeer Influenced and Corrupt Organizations Act (RICO), may consist solely of a corporate defendant and its subsidiaries and agents. The NAM is greatly concerned about current RICO pleading standards that encourage strike suits against its members and stifle the ability of American businesses to operate efficiently across multiple jurisdictions through subsidiaries and agents. There is a circuit split over whether a corporation conducts or participates in the affairs of a distinct “enterprise,” within the meaning of the RICO statute, when the only members of the alleged enterprise are the corporation itself and third parties paid by the corporation to conduct business on its behalf. The Supreme Court has previously established that a RICO defendant must have participated in or conducted the affairs of a distinct enterprise, and not simply the defendant’s own affairs, in order to be found liable under RICO. In this case, the Ninth Circuit held that the “enterprise” consisted of NDS Group, its wholly-owned subsidiary, NDS Americas, and the agents of NDS Group.
While the Ninth Circuit’s definition of a RICO enterprise accords with that of the Sixth and Eleventh Circuits, it conflicts with that of the Second, Third, and Seventh Circuits, which correctly recognize that an enterprise consisting solely of a corporation and its subsidiaries and agents fails to meet RICO’s well-established “distinctiveness requirement.” This issue continues to be important to every business that relies on third parties to perform corporate functions.
The Supreme Court declined to hear this appeal on Oct. 1, 2007.