Article by Christopher W. Madel
In Reves v. Ernst & Young, the United States Supreme Court held that, in order to establish a violation of section 1962(c) of the Racketeer Influenced and Corrupt Organization Act (RICO), one must show that each section 1962(c) defendant “operated” or “managed” the enterprise at issue. Numerous commentators and several courts herald and employ Reves to absolve “outside” professionals, e.g., accountants and attorneys, from attack under section 1962(c), the most popularly used section of RICO. This Article argues that Reves did not create an artificial barrier to applying section 1962(c) to any person, including outside professionals. Rather, the decision requires civil claimants to prove each defendant's position and participation within the enterprise. That is, Reves requires that a 1962(c) defendant either operate or manage the enterprise's affairs, or act “under the direction of” those who do. Thus, to establish a defendant's violation, the claimant must (1) identify at least one high-ranking person within the enterprise (the “position” prong) and (2) prove that each defendant sufficiently participated in the “enterprise's affairs,” i.e., either led, ran, directed, or managed the enterprise's affairs by acting “under the direction of” the enterprise's upper management (the “participation” prong). By manipulating the size, composition, and structure of the enterprise, section 1962(c) claimants can regularly allege an enterprise to capture any person within the intricate web of section 1962(c).
About the Author
Christopher W. Madel. B.A. Macalester College; J.D. University of Michigan Law School; Trial Attorney, United States Department of Justice, Antitrust Division, 1994-95. Associate attorney with Winthrop & Weinstine, P.A., in Minneapolis, Minnesota.
Citation
71 Tul. L. Rev. 1133 (1997)