Saucier v. Katz
533 U.S. 158, 121 S. Ct. 2087, 150 L. Ed. 2d 198 (2001)
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Rule of Law:
Under the Racketeer Influenced and Corrupt Organizations Act (RICO), the legal distinction between a natural person and the corporation they own is sufficient to satisfy the requirement that the liable 'person' be distinct from the 'enterprise' whose affairs they conduct.
Facts:
- Cedric Kushner Promotions, Ltd. is a corporation that promotes boxing matches.
- Don King is the president and sole shareholder of a rival corporation, Don King Productions.
- Cedric Kushner Promotions alleged that King conducted the business affairs of his corporation, Don King Productions, through a pattern of racketeering activity, including fraud.
- For the purposes of the court's analysis, it was assumed that King was acting within the scope of his authority as an employee of his corporation.
Procedural Posture:
- Cedric Kushner Promotions, Ltd. sued Don King and Don King Productions in the U.S. District Court for the Southern District of New York, alleging RICO violations.
- The District Court dismissed the complaint, citing Circuit precedent.
- Kushner Promotions, as appellant, appealed the dismissal to the U.S. Court of Appeals for the Second Circuit.
- The Second Circuit affirmed the District Court's dismissal in favor of King, as appellee.
- The U.S. Supreme Court granted a writ of certiorari to resolve a conflict among the Circuit courts.
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Issue:
Does the RICO statute, 18 U.S.C. § 1962(c), which requires a 'person' to be distinct from the 'enterprise,' apply to a corporate employee who is also the sole owner of the corporation, where the corporation itself is the alleged 'enterprise'?
Opinions:
Majority - Justice Breyer
Yes. The RICO provision applies because a corporate owner/employee is legally distinct from the corporate entity itself. The statute requires two distinct entities, a 'person' and an 'enterprise,' and the formal legal separation created by incorporation is sufficient to meet this 'distinctness' requirement. The plain language of RICO defines a 'person' to include any individual and an 'enterprise' to include a corporation, making an employee and their corporation different 'persons' linguistically and legally. The fundamental purpose of incorporation is to create a legal entity with rights and responsibilities separate from the individuals who own or run it. This interpretation is consistent with RICO's goal of protecting the public from those who would use an enterprise as a 'vehicle' for unlawful activity, regardless of whether the person conducting its affairs is the sole owner.
Analysis:
This decision clarifies a crucial aspect of RICO's 'person/enterprise' distinction, particularly for closely held corporations and their owners. By holding that the formal act of incorporation creates the necessary legal distinction, the Court prevents corporate insiders, including sole proprietors, from shielding themselves from RICO liability by arguing they are legally indistinct from their company. This broadens the reach of RICO to target high-level corporate officers who use their own companies as instruments for racketeering. The ruling effectively closed a potential loophole that would have immunized the very individuals RICO was often designed to prosecute.
