The Section 1962(b) Claim

Section 1962(b) provides in relevant part:

"It shall be unlawful for any person through a pattern of racketeering activity ... to acquire or maintain, ... any interest in or control of any enterprise...."

So, as Judge Rakoff's treatise points out, § 1962(b) represents a another step in the progression from 1962(a) through 1962(c). Whereas 1962(a) involves a situation where the racketeer is merely investing in the legitimate enterprise, 1962(b) involves a the more alarming situation where the defendant now owns or controls the enterprise. (And 1962(c) involves a situation where the defendant is engaged in the operation or management of the enterprise.)

Furthermore, unlike § 1962(a), which doesn't require any relationship between the pattern of racketeering activity and the enterprise in which the investment is made, § 1962(b) requires that the purpose of the racketeering activity be to acquire the interest in the enterprise.

Acquisition or Maintenance Injury Required

To maintain a claim under Section 1962(b), it is not enough to allege an injury resulting from the predicate acts. The Plaintiff must allege an injury resulting from the acquisition or maintenance of the interest in or control of the enterprise. Discon, Inc. v. Nynex Corp., 93 F.3d 1055, 1063 (2nd Cir. 1996). This kind of injury has been called the "acquisition or maintenance" injury.

The requirement of an acquisition or maintenance injury arises from § 1964. That section grants a cause of action to recover losses arising from a violation of § 1962. Significantly, § 1964 doesn't grant the cause of for losses arising from the commission of predicate acts of racketeering themselves, but only losses arising from a violation of § 1962. So, the reasoning goes, the plaintiff must have to show loss from the violation of 1962(b).

But what kind of injury is it that results from acquisition or maintenance? Judge Rakoff, who wrote the leading treatise on RICO, calls the concept of an acquisition or maintenance injury "ephemeral", and says it "applies only with difficulty to Subsection 1962(b)".

Reflecting the elusiveness of the concept, consider the Third Circuit's description of the kind of injury required:

"Such an injury may be shown, for example, where the owner of an enterprise infiltrated by the defendant as a result of racketeering activities is injured by the defendant's acquisition or control of his enterprise." Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153 (3rd Cir. 1993).

But that's largely just a restatement of the text of § 1962(b), and not particularly helpful.

In any event, as a result of the elusiveness of the concept of an acquisition or maintenance injury, many decisions hold that the plaintiff has not alleged an acquisition or maintenance injury, but relatively few describe what such an injury would look like. Perhaps for that reason, many RICO litigators avoid § 1962(a) and (b), both of which have such requirements, and favor § 1962(c), which the Supreme Court has held does not.

The Distinctness Requirement

It has also been held that the text of § 1962(b) imposes a so-called "distinctness" requirement. That is, § 1962(b) forbids a "person" from acquiring an interest in an "enterprise". That, the reasoning goes, necessarily implies that the person and the enterprise be distinct from one another. And the distinctness requirement has been the downfall of many § 1962(b) claims. However, a partial overlap between the person and the enterprise does not prevent satisfying the distinctness requirement.

Jacobson v. Cooper, 882 F.2d 717, 720 (2nd Cir. 1989) illustrates the latter point. There, the enterprise was a real estate venture owned by the plaintiff but operated by his son and a former business partner. The plaintiff alleged that the son and business partner, through acts of racketeering such as mail fraud, defrauded him of the profits of the enterprise. Since the son and the business partner did not comprise the entire enterprise-- i.e., did not include the plaintiff himself-- the distinctness requirement was deemed satisfied.

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