18 A. The "Relationship" Between The “Racketeering Activity" And RICO's Proscribed Conduct The "relationship" aspect of the test recognizes that it is not sufficient simply to allege a laundry basket of disparate "racketeering activities" that, while occurring over time, have no relevant interconnection to RICO's proscribed conduct and so cannot be said to be a "reliable sample" of acts that fairly "characterize" the conduct as that of a professional criminal or a corrupt organization. For each RICO subsection the critical inquiry is whether the acts of racketeering are a central part of the plan to achieve what RICO outlaws-some prohibited effect on the enterprise that RICO seeks to protect from being "influenced or corrupted" by racketeers. Under Section 1962(a), for example, the relationship aspect of the "pattern" test requires proof that the separate racketeering acts that generated the proceeds were tied together as part of a plan or scheme to invest in the enterprise. Similarly, under Section 1962 (b), the "racketeering acts" must be related to each other in that the accused engaged in those acts in order to acquire or maintain control of the enterprise. Finally, under Section 1962 (c), the predicate "racketeering" acts all must be related to conducting the affairs of the enterprise. See, e.g., Torwest DBC, Inc. v. Dick, 628 F. Supp. 163, 166 (D. Colo. 1986), aff'd, 810 F.2d 925 (10th Cir. 1987).10 10 The "racketeering" acts would not have to be related to each other in the sense that they are similar. That kind of requirement would make RICO inapplicable even to wholly criminal syndicates that engage in diverse criminal activity at different times and places in order to accomplish the goals that Section 1962 prohibits. See, e.g., United States v. Anderson, 626 F.2d 1358, 1367 (8th Cir. 1980), cert. denied, 450 U.S. 912 (1981); United States v. Elliott, 571 F.2d 880, 899 n.23 (5th Cir.), cert. denied, 439 U.S. 953 (1978). B. The "Continuity" Of "Racketeering Activity” In The "continuity" branch of the "pattern" requirement has two features. First, a "pattern" cannot consist of what is essentially a single episode or transaction. There is no reasonable basis to infer that a person is a career or habitual criminal, properly within RICO's gunsights, if he has engaged only in what is essentially a single criminal transaction, even if as a technical matter it is possible to subdivide it into individual incidents of "racketeering activity." Many courts as well as the Justice Department's RICO Guidelines recognize that reliance on "isolated" or "sporadic" criminal events would eviscerate the "pattern" requirement and would convert into a RICO criminal or treble-damage case virtually any commercial dispute that one party wants to term fraudulent."1 To avoid that result. the "pattern" element must be understood as requiring allegations and proof of at least two acts of "racketeering activity" at substantially different times as a part of distinct criminal episodes or transactions. Thus, for example, virtually simultaneous multiple mailings of the same document may constitute multiple instances of mail fraud, but they do not in any true sense establish that the accused has engaged in a course of conduct that one normally associates with a "pattern" of behavior. The same is true about communicating a series of allegedly false letters or documents as part of the same set of business relationships.12 11 See, e.g., 10 Department of Justice Manual, tit. 9, ch. 110, RICO Guidelines, §§ 9-110.340-341 (Prentice Hall 1988); Morgan v. Bank of Waukegan, 804 F.2d 970, 976 (7th Cir. 1986); Ghouth v. Conticommodity Services, Inc., 642 F. Supp. 1325, 1337 (N.D. III. 1986). 12 See, e.g., Tellis v. United States Fidelity & Guar. Co., 826 F.2d 477, 478 (7th Cir. 1987) ("multiple acts of mail fraud in furtherance of a single episode of fraud involving one victim and relating to one basic transaction cannot constitute the necessary pattern"). 20 In addition, the "continuity" aspect of "pattern" reflects the core concept, that the acts of criminal racketeering are typical or characteristic of the conduct of the allegedly corrupt person or enterprise. That is, the continuing criminal activity must be a substantial rather than incidental part of the accused's relationship with the enterprise (in the case of subsections (a) and (b)) or of the conduct of the affairs of the enterprise (in subsection (c) cases). As courts have recognized in this regard: "[W]e do not stop at requiring a showing of multiple episodes because this alone does not adequately resolve the tension between isolated and ongoing activity. We find that RICO's purposes are best served by also requiring that, from the pleadings, a reasonable inference can be made that these episodes were not an aberration in the way a defendant conducted his business. Rather, the pattern made up of multiple episodes must be a regular part of the way a defendant does business and in that sense, ongoing." 13 This aspect of the "pattern" standard would require in a Section 1962 (a) case a finding that the various acts of racketeering constituted a substantial portion of the actions by which the defendant generated the proceeds that he used to invest in the enterprise. If the proceeds had come mainly from legitimate sources, simply supplemented by the fruits of two or more illicit transactions, the investment of those proceeds could not be viewed as evincing a "pattern" of criminal activity. The same test would apply in determining whether the racketeering activity was substantially responsible for the accused's ability to acquire or maintain control of the enterprise in violation of Section 1962 (b), and thus formed the necessary "pattern." 13 Papai v. Cremosnik, 635 F. Supp. 1402, 1412 (N.D. Ill. 1986) (emphasis added); see Thompson v. Wyoming Alaska, Inc., 652 F. Supp. 1222, 1228 (D. Utah 1987). 21 Section 1962 (c) deserves special attention, because plaintiffs have used it most often to turn ordinary civil litigation into treble-damage RICO actions. See, e.g., ABA Report, supra, at 57 (approximately 97% of civil RICO cases brought before 1985 relied on Section 1962 (c)). Congress added Section 1962 (c) in response to Justice Department criticism that RICO's predecessor proposals addressed only the acts of infiltration but not their aftermath, when the professional criminal actually operated the corrupted enterprise by a pattern of criminal acts. See Senate Hearings at 387; Lynch, supra, 87 Colum. L. Rev. at 682. Indeed, the Senate Judiciary Committee expressly recognized this critical notion, stating: "when organized crime moves into a business, it usually brings to that venture all the techniques of violence and intimidation which it used in its illegal businesses." S. Rep. 91-617, supra, at 77; see also McClellan, supra, 46 Notre Dame L. Rev. at 141 ("Once it invades a legitimate field of endeavor, the mob quickly brings with it a full range of corrupt practices"). Thus, the "pattern" standard under Section 1962 (c) requires that the plaintiff allege and prove that racketeering acts are a substantial enough part of the enterprise's affairs that it is reliable to treat the enterprise as "corrupted," and not just involved in an incidental or aberrational crime. III. OTHER PROPOSED INTERPRETATIONS OF THE "PATTERN" ELEMENT OF RICO FAIL TO CARRY FORTH ITS MEANING AND PURPOSE. A. The "Multiple Transactions" Test The interpretation based on "typicality" and evidence of habitual criminal behavior better implements the "pattern" element than the simple "multiple transactions" test that several circuits have embraced. Sce, e.g., Sun. Sav. & Loan Ass'n v. Dierdorff, 825 F.2d 187, 193 & n.4 (9th Cir. 1987); Elliott v. Chicago Motor Club, Ins., 809 F.2d 347, 349-50 (7th Cir. 1986). That test and other sim 22 ilar formulations, see, e.g., Barticheck v. Fidelity Union Bank/First Nat'l State, 832 F.2d 36, 38-39 (3d Cir. 1987); Roeder v. Alpha Indus., Inc., 814 F.2d 22, 31 (1st Cir. 1987), add little as a practical matter beyond the threshold requirement of two acts of "racketeering" within ten years. In the modern economic world, almost any commercial relationship will involve a sufficient number of participants and will extend over a sufficiently long period of time that a competent attorney will be able to plead multiple "transactions" easily in almost any commercial civil litigation in which the plaintiff is willing to allege "fraud." See, e.g., Exeter Towers Assoc. v. Bowditch, 604 F. Supp. 1547, 1554-55 (D. Mass. 1985). For instance, in the standard securities class-action in which the accounting firm is one of the "deep pocket" defendants, the plaintiffs typically allege that the company's financial statements, which are mailed to thousands of investors and usually reappear in several different audited statements, contain some "fraudulent" misstatement or non-disclosure, and that the accountants "knew of" or "recklessly disregarded" the alleged fraud when rendering the audit report. Under any of the formulations offered by the petitioners, the amici who support them, or the courts that have interpreted "pattern" to require only multiple "episodes" or "transactions," these ordinary securities law suits would probably remain RICO suits, even though it is obvious that in the typical case any misconduct would not fairly characterize the accounting firm, its audit partner, or its client as a habitual criminal or a basically corrupt organization." 14 As evidence that "fraudulent financial reporting" is a "serious national problem," the Trial Lawyers for Public Justice cite the fact that "major accounting firms" have paid more than $180 million to settle liability suits since 1980. TLPJ Brief at 21. Apart from the fact that this assertion has nothing to do with whether Congress intended to have RICO reach false financial reports by publicly-held companies or their professionally licensed auditors, this Court already has recognized that defendants settle RICO suits for many reasons, and that the threat of treble-damages often |