The Ninth Circuit holds that a RICO claim cannot be stated against an attorney who merely provided legal services to a client.
Patricia Ward Walter created a revocable living trust with herself as sole trustee. Her four children, including Robert and Elizabeth, were designated as equal beneficiaries. Karen Temple is a lawyer who represented Patricia Walter in various trust matters and did legal work for the trustees.
Robert Walter filed a RICO claim against Temple alleging that she acted in her personal, rather than professional, capacity. He alleged that Temple advised the trustee not to send monthly reports and refused to allow Robert to see non-privileged trust documents not protected by the attorney client privilege, and sent communications to non-clients. Robert alleged that Temple and her clients were an associated-in-fact enterprise to achieve the shared goal of gaining control of the trust, facilitating the wrongful taking of trust assets, fraudulently obtaining releases of liability, concealing their acts, and impeding justice. The complaint charged that these acts amounted to blackmail, extortion, mail fraud, theft, waste of trust assets, and other predicate RICO offenses.
The district court dismissed all claims against Temple because she did not do anything beyond acting as legal counsel to the trust.
Under RICO, 18 U.S.C. § 1962(c) a plaintiff must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Walter argued that Temple had a major role in the enterprise in that she did not act in accordance with applicable Hawai’i and professional standards.
Prior case law established that “conduct” does not include the failure to advise correctly in a professional capacity. Otherwise, almost any involvement would do. The word “conduct” in the statute requires an element of direction. To “participate” connotes “to take part in” and thus under the statute a person must have some part in directing affairs.
Prior case law supported the conclusion that an attorney providing legal services who held no formal position and played no part in directing the affairs of the enterprise could not be liable under RICO.
Temple’s involvement was insufficient. She performed legal services and whether or not those services were deficient is immaterial. Temple was not directing the enterprise. She did not have the obligation to stop illegal activity because precedent requires some degree of direction. Finally the factual allegations raised no inference that Temple tried to control the enterprise by anything akin, for example, to bribery.
The court rejected Walter’s distinction that unlike the authority the Court relied on, his complaint alleged an associated-in-fact enterprise and thus Temple was not an outsider. The court held that even with this distinction, there must be an element of direction because the statute’s “conduct” requirement applies without regard to the nature of the enterprise.
Temple was involved as an alleged part of the enterprise, but the conduct attributed to her would not support recovery for giving, or taking, direction. She was not in the chain of command through which the affairs of the enterprise were conducted. She did not become a participant in directing the enterprise’s affairs by knowingly implementing decisions of upper management. She was not indispensable to achievement of the enterprise’s goal.
Comment: Courts have carefully examined the rights and obligations of attorneys to non-clients for decades. This decision shows that application of criminal conspiracy statutes should not dismantle this careful jurisprudence.