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Cedric Kushner Promotions, Ltd. v. King - 533 U.S. 158, 121 S. Ct. 2087 (2001)

Rule:

18 U.S.C.S. § 1962(c)--a provision of RICO--applies when a corporate employee unlawfully conducts the affairs of the corporation of which he is the sole owner, whether he conducts those affairs within the scope, or beyond the scope, of corporate authority.

Facts:

Petitioner, a corporate promoter of boxing matches, sued respondent Don King, the president and sole shareholder of a rival corporation, alleging that King had conducted his corporation's affairs in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) through the alleged commission of at least two instances of fraud and other RICO predicate crimes. RICO made it "unlawful for any person employed by or associated with any enterprise to conduct or participate in the conduct of such enterprise's affairs through a pattern of racketeering activity," 18 U.S.C. § 1962(c). The District Court, citing Circuit precedent, dismissed the complaint. In affirming, the Second Circuit expressed its view that § 1962(c) applied only where a plaintiff showed the existence of two separate entities, a "person" and a distinct "enterprise," the affairs of which that "person" improperly conducted. The appellate court noted that King, who was an employee of his corporation and who acted within the scope of his authority, was part of the corporation, and not a "person," distinct from the "enterprise," who allegedly improperly conducted the “enterprise’s affairs.”

Issue:

Did 18 U.S.C. § 1962(c), a provision of RICO, apply when a corporate employee unlawfully conducted the affairs of a corporation of which he was the sole owner?

Answer:

Yes.

Conclusion:

Reversing, the Supreme Court of the United States held that, while the enterprise required by the statute must be more than the person operating under another name, the requisite distinctness between respondent and his corporation was established because they were legally different entities. The corporate owner/employee was a natural person and distinct from the corporation itself, which was a legally different entity with different rights and responsibilities due to its different legal status; nothing in the statute required more "separateness" than that. According to the Court, the formal legal distinction between respondent and his corporation was sufficient to apply RICO to respondent's conduct, and it made no difference whether respondent was acting within the scope of his corporate employment when he allegedly engaged in the criminal activities. Accordingly, the Court concluded that the "person" and "enterprise" here were distinct and that the RICO provision applied.

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