Eleventh Circuit Construes RICO’s Association-in-Fact Requirement

In an interesting opinion, the Eleventh Circuit Court of Appeals construed the Racketeering Influenced and Corrupt Organizations (RICO) statute to allow a claim against a married couple that cooperated between themselves to evade the husband’s creditors.  The husband was subject to a $25 million judgment.  The couple transferred assets into the wife’s name and otherwise hid money from the creditors.  Later, the couple affirmatively lied (and contradicted each other) as to the existence, location, and handling of their assets.

A RICO claim normally requires a showing that the defendants operated an enterprise through a pattern of racketeering activity.  In this case, the Eleventh Circuit focused on the “enterprise” requirement.  A RICO “enterprise” may be a business, partnership, union, cartel, gang, or, in this case, a family.  The trial court ruled that a RICO “enterprise” must have been formed for the purpose of committing the crime. (Interestingly, this conclusion conflicts with other caselaw holding that the association must have some existence other than for the purpose of committing the crime, otherwise any crime involving two or more participants could, without more, be a RICO enterprise.) Here, the trial court apparently deemed the couple’s association to be a bona fide marriage and therefore not a RICO “enterprise.”

The Eleventh Circuit reversed the trial court’s decision.  The Eleventh Circuit noted that the RICO statute is to be “liberally construed to effectuate its remedial purposes.”  The Court then noted that “neither the text of RICO nor any relevant precedent requires an association-in-fact enterprise to consist of strangers who originally met for the purpose of engaging in illegal activity” and that an “association-in-fact enterprise [need not] be businesslike.” (internal quotes and citations omitted)

The Appellate Court concluded that “we cannot agree with the district court’s conclusion that, as a matter of law, an association-in-fact enterprise cannot exist here simply because the couple’s alleged bad acts were confined to the management of their personal funds.”  The Court added that “federal courts have routinely recognized association-in-fact enterprises made up of individuals who had relationships that predated their schemes.”  The Court concluded that a “marriage certificate does not transform alleged mail and wire fraud into ordinary household management.  Under RICO, the same rules apply to married people as to everyone else.”

As this case illustrates, RICO remains a powerful tool for use in commercial litigation when a defendant has engaged in criminal conduct.  As this case also illustrates, effective use of the RICO statute depends on careful analysis of each of the elements, which are highly technical and require an attorney experienced in such litigation.

The case is Al-Rayes v. Willingham, 914 F. 3d 1302 (11th Cir. 2019).