Cedric Kushner Promotions v. King, Don, et al. (06/11/2001)

By: Gerry Baksys, Medill News Service

Questions presented

(1) Did the 2nd Circuit, in direct conflict with all of other courts of appeals that have considered same issue, the holding in Reves v. Ernst & Young, 507 U.S. 170 (1993), and the plain language of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. @ 1962(c), properly affirm the district court's holding, which found deficient as a matter of law the claim against a corporate president designated as a RICO ""person"" for engaging in predicate acts by and through the corporation designated as a RICO ""enterprise""? (2) Is it appropriate to continue the rule, which now applies in the 2nd Circuit, in which persons, including organized crime members, can insulate themselves from RICO liability simply by forming a corporation and engaging in predicate acts through that corporation?

Brief

It was the fight that never happened.

On Sept. 26, 1998, boxer Hasim ""The Rock"" Rahman was scheduled to fight David Tua on HBO. Rahman, who turned pro at 22, had won his first 28 fights. Tuas fight was to be the opening bout for the Lennox Lewis-Zejlko Marovic heavyweight match.

A few days before the Tua bout, Rahman told the press that he had a hand injury, and could not proceed with the fight. But Rahman had already told his promoter a different story.

Rahman met with his promoter, Cedric Kushner, on Aug. 28, and told him that rival boxing promoter Don King had met with him in Las Vegas and paid him not to fight. At that meeting, King gave Rahman a $125,000 check drawn on an account of Don King Productions, Inc., and told him that he would never be the number one fighter without him. ""He said he controlled the ranking,"" Rahman recalled.

Two days after the aborted bout, Cedric Kushner Promotions filed a $12 million federal suit against King, Don King Productions Inc., and DKP Corporation (the successor in interest to King Productions), alleging that Kings actions violated the Racketeer Influenced and Corrupt Organization Act (RICO). RICO allows people to file federal suits, seeking triple damages against people accused of conducting an enterprise's affairs through a pattern of racketeering activity.

Kushner also claimed common law fraud and tortious interference with contract..The U.S. District Court for the Southern District of New York dismissed the RICO claim, concluding that Kushner had failed to allege a distinct RICO enterprise.

Under RICO, ""an enterprise and the persons conducting the affairs of an enterprise must be distinct,"" for there to be a pattern of racketeering activity, Judge William Pauley III stated.

In essence, Kushner was alleging that the RICO conspiracy involved King as the RICO person and his company, DKP, as the RICO enterprise through which King engaged in a pattern of racketeering activities.

Yet, the judge concluded, because Kushner was not suggesting that King acted outside the scope of his duties as an officer of DKP, and was acting in the corporation's behalf, he does not function as an entity ""distinct"" from that corporation.

In dismissing the RICO count, the judge also dismissed the two other counts because, standing alone, they lacked federal jurisdiction.

Before the 2nd Circuit Court of Appeals, both parties agreed that the RICO claims against DKP were dropped, leaving King as the sole RICO defendant. Kushner argued that by doing so, the distinction requirement of RICO is inapplicable when only the RICO person, and not the RICO enterprise, is a defendant.

Nonetheless, a unanimous panel affirmed, holding that by 2nd circuit precedent, there was ""no room for creating exceptions to the distinctness requirement based on the identity of the defendant.""

In so holding, the court stated in a footnote: ""We recognize that our conclusion is in tension, if not conflict, with the decisions of other Courts of Appeals, but these decisions are contrary to our understanding of the distinctness requirement, as expressed in (its own precedent). We follow here the law of our Circuit and decline to embrace the authority of those other Circuits.""

On Dec. 11, 2000, the same day the U.S. Supreme Court heard historic oral arguments for a second time in Bush v. Gore, the Court granted a certiorari in this case.

Upon returning to Kushner after his exchange with King, Rahman said, ""I feel as if a load is off my shoulders and I'm ready to fight. I know I made a mistake and I'm trying to correct it and go on with my career.""

On April 21, 2001, three days after oral arguments in the case, Rahman faced then heavyweight champion Lennox Lewis in South Africa for the title of the International Boxing Federation. Rahman won.

King denies any contact with Rahman, and denies the existence of the $125,000 check, according to Peter Fleming Jr., Kings attorney in the case.

On March 26, 2001, the Court allowed the Acting Solicitor General to file an amicus brief in the case supporting Kushner's position, and divide the time for oral argument.

On June 11, 2001, a unanimous Court sided with Kushner, reinstating his racketeering suit against King.

A corporate employee who conducts the corporation's affairs through an unlawful pattern of activity ""uses that corporation as a vehicle whether he is, or is not, its sole owner,"" Justice Stephen Breyer wrote for the unanimous Court.

Breyer wrote that the unacceptable consequence of the lower court rulings would be to immunize from RICO liability ""high-ranking individuals in an illegitimate criminal enterprise.""