473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)
In 1979, petitioner Sedima, a Belgian corporation, entered into a joint venture with respondent Imrex Co. to provide electronic components to a Belgian firm.1 The buyer was to order parts through Sedima.2 Imrex was to obtain the parts in this country and ship them to Europe.3 The agreement called for Sedima and Imrex to split the net proceeds.4 Imrex filled roughly $8 million in orders placed with it through Sedima.5
Sedima became convinced that Imrex was presenting inflated bills, cheating Sedima out of a portion of its proceeds by collecting for nonexistent expenses.6 In 1982, Sedima filed this action in the Federal District Court for the Eastern District of New York.7 The complaint set out common-law claims of unjust enrichment, conversion, and breach of contract, fiduciary duty, and a constructive trust.8 In addition, it asserted RICO claims under § 1964(c) against Imrex and two of its officers.9
Two counts alleged violations of § 1962(c), based on predicate acts of mail and wire fraud.10 A third count alleged a conspiracy to violate § 1962(c).11 Claiming injury of at least $175,000, the amount of the alleged overbilling, Sedima sought treble damages and attorney's fees.12 The District Court held that for an injury to be "by reason of a violation of section 1962," as required by § 1964(c), it must be somehow different in kind from the direct injury resulting from the predicate acts of racketeering activity.13
It found no allegation here of any injury apart from that which would result directly from the alleged predicate acts of mail fraud and wire fraud.14 Accordingly, it dismissed the RICO counts for failure to state a claim.15 A divided panel of the Court of Appeals for the Second Circuit affirmed.16 After a lengthy review of the legislative history, the Court of Appeals held that Sedima's complaint was defective in two ways.17 It failed to allege an injury "by reason of a violation of section 1962."18 It also failed to allege that the defendants had already been criminally convicted of the predicate acts of mail and wire fraud, or of a RICO violation.19 In light of the variety of approaches taken by the lower courts and the importance of the issues, the Supreme Court granted certiorari.20
Whether a private civil action under 18 U.S.C. § 1964(c) may proceed only against a defendant who has already been criminally convicted of the predicate acts or of a RICO violation?21
The language of RICO gives no obvious indication that a civil action can proceed only after a criminal conviction.22 The word "conviction" does not appear in any relevant portion of the statute.23 The predicate acts involve conduct that is "chargeable" or "indictable," and "offense[s]" that are "punishable," under state criminal laws as well as specific federal provisions including mail and wire fraud.24 A prior-conviction requirement cannot be found in the definition of "racketeering activity."25 Nor can it be found in § 1962.26
No. The established facts show that in 1982 Sedima filed its complaint in the Eastern District of New York alleging violations of § 1962(c) based on predicate acts of mail and wire fraud without any prior criminal convictions of Imrex or its officers.27 The District Court and the Second Circuit imposed a prior-conviction requirement that finds no support in the statutory text referring to acts that are merely chargeable or indictable.28 The legislative history confirms that Congress modeled the private remedy on the Clayton Act without adding any conviction prerequisite.29 Policy considerations show that such a requirement would defeat the purpose of filling prosecutorial gaps with private attorney general actions.30
A private civil RICO action under § 1964(c) does not require a prior criminal conviction of the defendant.31
Related opinions on this issue
Joined by Justice Brennan, Justice Blackmun, And Justice Powell
Justice Marshall dissented on broader grounds.32 He argued that the Court's reading federalizes state common-law fraud claims and displaces federal securities remedies by allowing two instances of mail or wire fraud to trigger treble damages without any distinct racketeering injury.33 He emphasized that Congress intended to compensate only for competitive or infiltration injury resulting from the economic power of racketeers, not direct harm from predicate acts.34
The absence of prosecutorial discretion in civil cases would lead to abusive litigation against legitimate businesses.35
Justice Powell joined Justice Marshall's dissent and wrote separately to emphasize his disagreement with the Court's conclusion that the statute must be applied to authorize private civil actions against respected businesses to redress ordinary fraud and breach-of-contract cases.36 He stressed that the legislative history demonstrates Congress targeted organized crime, as shown by the Act's title and repeated references throughout the debates.37 Powell argued that the "pattern" element was intended to limit RICO to planned, ongoing criminal enterprises rather than sporadic acts like the isolated fraud alleged here.38
He concluded that the Court has a duty to implement the unequivocal intention of Congress by reading the statute more narrowly to reach only the mobsters and racketeers originally contemplated.39
Whether a plaintiff in a private action under 18 U.S.C. § 1964(c) must allege an injury by reason of a violation of section 1962 that is different in kind from the direct injury resulting from the predicate acts, such as a distinct racketeering injury or competitive injury?40
Section 1964(c) authorizes a private suit by "Any person injured in his business or property by reason of a violation of section 1962."41 Section 1962 makes it unlawful for any person to conduct an enterprise through a pattern of racketeering activity.42 If the defendant engages in a pattern of racketeering activity in a manner forbidden by these provisions, and the racketeering activities injure the plaintiff in his business or property, the plaintiff has a claim under § 1964(c).43 There is no room in the statutory language for an additional, amorphous "racketeering injury" requirement.44
No. The established facts establish that Sedima alleged injury of at least $175,000 from overbilling through inflated invoices sent via mail and wire, which directly resulted from the predicate acts of mail and wire fraud committed in the conduct of the joint-venture enterprise.45 The District Court and Second Circuit required a distinct racketeering injury beyond harm from the predicate acts themselves.46 The statute requires only that the plaintiff be injured in business or property by reason of the § 1962 violation, which occurs when predicate acts are committed through the enterprise.47 The compensable injury is precisely the harm caused by those predicate acts when they form a pattern in connection with the enterprise.48
No distinct racketeering injury or competitive injury beyond harm from the predicate acts is required to state a claim under § 1964(c).49
Related opinions on this issue
Joined by Justice Brennan, Justice Blackmun, And Justice Powell
Justice Marshall argued that the statute requires injury resulting from the confluence of events in § 1962 rather than from the predicate acts alone.50 He illustrated that Congress targeted competitive or infiltration injury to honest businessmen, such as lost profits from monopolization or added costs from extortion, while direct victims of predicate acts like fraud would rely on state law remedies.51 Allowing recovery for direct predicate-act harm would federalize ordinary fraud and produce the very extortive litigation the statute was meant to prevent.52
Justice Powell agreed that the broad construction validated unintended uses against legitimate businesses in ordinary fraud cases.53 He stressed that the "pattern" requirement should be interpreted to demand continuity and relationship among acts to focus on organized crime.54 Powell noted that the Court's rejection of any racketeering-injury limitation would make it difficult for lower courts to confine the statute to its intended scope.55
The legislative history shows Congress aimed at mobsters rather than everyday commercial disputes, and the expansive reading contradicts that purpose.56