The Ninth Circuit overruled prior Ninth Circuit precedent in Odom v. Microsoft Corp., 486 F.3d 541, 543 (9th Cir. 2007), holding that its prior case law concerning “enterprises” under Racketeer Influenced and Corrupt Organizations Act (RICO) is confusing and inconsistent with United States Supreme Court authority.
Odom v. Microsoft was filed as a class action alleging a RICO violation because “Best Buy and Microsoft, acting together pursuant to their agreement, constituted an associated-in-fact enterprise under RICO; that their actions, involving ‘thousands’ of consumers, constituted a ‘pattern of racketeering activity’ under RICO; and that they committed the RICO ‘racketeering activity’ predicate act of wire fraud in violation of 18 U.S.C. § 1343.” The complaint alleged that Best Buy gave customers different MSN trial software depending on the product purchased, and scanned debit/credit card information with the trial software not for “inventory control” (as purportedly represented to customers) but so Microsoft would have billing information for customers who failed to cancel their trial subscriptions to MSN. Specifically, one of the plaintiffs alleged that he purchased a laptop computer from Best Buy and told the company that he did not need the MSN trial software because he used another Internet service, that he never used the MSN software during the 6-month trial period following his purchase, and that after 6 months MSN began charging the credit card he used to purchase the laptop for Internet service.
Best Buy and Microsoft moved to dismiss the case under Rule 12(b)(6), Federal Rules of Civil Procedure, and United States District Court Judge for the Western District of Washington, Marsha J. Pechman, dismissed the customers' class action Racketeer Influenced and Corrupt Organizations Act (RICO) suit for failure to allege an “associated in fact” “enterprise” and for failure to plead wire fraud with particularity. The Ninth Circuit reversed and remanded the case for trial holding that (1) an associated-in-fact enterprise under RICO does not require any particular organizational structure, separate or otherwise; overruling Wagh v. Metris Direct, Inc., 348 F.3d 1102;Simon v. Value Behavioral Health, Inc., 208 F.3d 1073 and Chang v. Chen, 80 F.3d 1293; (2) the customers sufficiently alleged that manufacturer and retailer formed an associated-in-fact enterprise; and (3) employee of retailer's store did not need to be named in order to plead predicate act of wire fraud.
Judge Silverman wrote a concurring opinion, joined in by Rymer, Tallman, Rawlinson and Bea, that argued the class action complaint failed to plead an “enterprise” within the meaning of RICO because it fails to allege an “ongoing organization” between Microsoft and Best Buy, but concurred in the result because the district court should have granted leave to amend the complaint. Judge Bybee also wrote a concurring opinion, joined in by Reinhardt, that argued it was “outlandish that what Judge Silverman correctly describes as a ‘marketing contract’ between Microsoft and Best Buy could subject them to a private RICO action.”
