Cedric Kushner Promotions, Ltd. v. King
Headline: RICO suits allowed when a company’s sole owner-president unlawfully runs the business; the Court held that the owner and the incorporated company are legally distinct, so RICO can apply.
Holding:
- Allows RICO claims against owner-employees who allegedly use their corporations to commit fraud.
- Reverses the Second Circuit and sends cases back for further litigation on the merits.
- Clarifies that incorporation creates the necessary legal distinctness for RICO liability.
Summary
Background
A corporation that promotes boxing matches sued an individual who is the president and sole shareholder of his own promotions company. The plaintiff alleged that the individual ran his company’s affairs through a pattern of fraud and other crimes that RICO forbids. A district court dismissed the complaint, and the Court of Appeals (Second Circuit) affirmed, saying the owner and the company were not distinct for RICO purposes. Other federal circuits reached the opposite conclusion, and the Supreme Court agreed to decide the split.
Reasoning
The central question was whether a natural person who is the sole owner and president of a corporation can be treated as a separate “person” from the incorporated company, so that RICO’s ban on a person conducting an enterprise’s affairs can apply. The Court said yes. It relied on RICO’s definitions (which treat individuals and corporations differently), ordinary language, and the statute’s purposes. The Court rejected the idea that acting within corporate authority makes the owner and the corporation identical. It reversed the Court of Appeals and sent the case back for further proceedings consistent with this ruling.
Real world impact
The decision makes clear that plaintiffs can bring RICO claims when an owner-employee allegedly uses a corporation as a vehicle for illegal activity, even if the owner acted within the scope of corporate authority. The case was returned to lower courts for further litigation on the factual merits.
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