should not countenance the unquestioning expansion of RICO liability. Rather, the import of such a command lies with the purposes of the statute.
The imposition of respondeat superior liability under § 1962(c) would not advance Congress's purposes and may conflict with such purposes. As previously noted, Congress adopted RICO to combat the infiltration of legitimate businesses by organized crime and to destroy organized crime's economic foundation. Plaintiff's arguments would impose § 1962(c) liability on "enterprises" which are not actively involved in racketeering activity. Imposing liability on "enterprises" which are simply unwitting employers of racketeers or passive instrumentalities for racketeering activity would not advance the preventative and remedial goals of RICO. Such penalties would not be effective because they focus on the medium not the wrongdoer. Placing penalties on an "enterprise" will not prevent "persons" from conducting racketeering activity through the "enterprise" or from continuing to serve as employees of the "enterprise". Thus, such penalties would not advance Congress' goals in passing the statute.
Indeed, I believe that imposing § 1962(c) liability via respondeat superior would be inconsistent with the goals of RICO. In passing RICO Congress was motivated, in part, by a desire to eliminate the diseconomies existing in the national economy which resulted from the activities of organized crimes.
For instance, the imposition of liability predicated on § 1962(c) and respondeat superior would penalize "enterprises" for being the target or vehicle of racketeering activity or for being the employer of a "person" who engages in racketeering activity. The imposition of liability upon an "enterprise" which is simply a racketeering target, an employer, or a passive instrumentality places additional costs on that "enterprise" not as a consequence of the "enterprise's" conduct but as a consequence of the racketeer's conduct. In short, plaintiff would have the "enterprise" pay for the § 1962 violation committed by the racketeer. The end result would be that the "enterprise" would pay the costs of the racketeer's activities--costs which are not necessitated by the free market. On a larger scale, the national economy would also continue to shoulder various costs related to organized crime. Plaintiff's position would result in continued diseconomies and conflict with Congress' Findings
and RICO's goal to minimize the economic disruptions caused by organized crime. Requiring a passive "enterprise" to pay penalties because of a racketeer's conduct would stand the statute on its head and result in continued diseconomies. As I have noted previously, such a broad interpretation would convert § 1962(c) into a blunt instrument contrary to the intent of Congress. Continental Data Systems, Inc. v. Exxon Corp., 638 F. Supp. 432, 440 (E.D. Pa. 1986).
A review of the legislative history indicates that Congress evinced no desire to extend RICO liability via the doctrine of respondeat superior to "enterprises" which are simply employers of racketeers or unwitting, passive instrumentalities for racketeering activity. S.Rep. 91-617, 1st Sess. (1969) at pp. 34, 76-83; H. Rep. 91-1549, 2nd Sess. (1970), reprinted in 1970 U.S. Code Cong. & Ad. News 4007, 4032-4036. In discussing liability and the definition of the term "person," the House Report
focused exclusively on the active wrongdoer. The Report stated, "Any such 'person' who violates the prohibitions of section 1962 is subject to the sanctions of sections 1963 and 1964, below-- including forfeiture, divestiture, dissolution, and prohibition of future holding of interest."
The Report's discussion of the terms "person" and "enterprise" contained no mention of respondeat superior liability.
Moreover, in discussing Title IX no member of Congress ever mentioned the possibility that § 1962 would support the application of respondeat superior liability.
In the words of Judge Coffin of the First Circuit Court of Appeals, "there is unlikely to be a situation, in the absence of an express statement, in which Congress more clearly indicates that respondeat superior is contrary to its intent." Schofield, 793 F.2d at 32.
C. Case Law.
Several cases have precluded liability under § 1962(c) based on respondeat superior. Schofield, 793 F.2d 28; Parnes v. Heinold Commodities, Inc., 548 F. Supp. 20, 23-4 (N.D. Ill. 1982); Dakis v. Chapman, 574 F. Supp. 757, 760 (N.D. Cal. 1983) (contrasting the "aggressor enterprise" with the "infiltrated enterprise"); Continental Data, 638 F. Supp. 432.
I note that Bernstein v. IDT Corp., 582 F. Supp. 1079, 1983-4 (D.Del. 1984), held that respondeat superior could apply to § 1962(c). I do not find Bernstein persuasive on this issue. First, Bernstein was announced before B.F. Hirsch, and, hence, was decided without the benefit of the Third Circuit's decision that the "person" and "enterprise" must be separate. Second, Bernstein did not thoroughly analyze how respondeat superior would further the goals of RICO and § 1962(c). See id. at 1083 & n.2. As discussed above, I do not believe that respondeat superior would further § 1962(c)'s goals. Third, Bernstein's reliance on American Society of Mechanical Engineers v. Hydrolevel Corp., 456 U.S. 556, 569, 72 L. Ed. 2d 330, 102 S. Ct. 1935 (1982)
for the position that imposition of respondeat superior liability would be acceptable does not account for the significant differences between the antitrust statutes and RICO. Such differences include the specific relationship and separateness between a "person" and "enterprise" required by § 1962(c) and Congress's goals in adopting RICO as contrasted with Congress' goals in adopting the antitrust statutes. See Continental Data, 638 F. Supp. at 440; Schofield, 793 F.2d at 33; accord, Parnes v. Heinold Commodities, Inc., 548 F. Supp. 20, 23-4 (N.D. Ill. 1982); see also Hellerstein & Klinger, "Derivative Liability Under RICO: No Room for Respondeat Superior," 1985 ALI-ABA Video Law Review: Civil RICO Litigation after Sedima, 185-201.
The language of § 1962(c), the legislative history behind RICO, and persuasive case law support the conclusion that § 1962(c) does not permit the imposition of respondeat superior liability.
IV. STATE NEGLIGENCE CLAIM
Plaintiff has also asserted a pendant state law negligence claim against Bell. Since I have dismissed the federal claim against Bell, I also conclude that pendant jurisdiction is no longer appropriate. Consequently, I will also dismiss the negligence claim. See United Mine Workers v. Gibbs, 383 U.S. 715, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966). Plaintiff, of course, may assert such a claim in state court.
As plaintiff has based his RICO complaint against Bell on the doctrine of respondeat superior, I conclude that plaintiff can prove no set of facts which would entitle him to relief. Therefore, Bell's motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) is granted. All motions for sanctions between Bell and Salvador are denied.
An appropriate order follows.
AND NOW, this day of June, 1987, it is hereby Ordered that:
1. Defendant Bell's motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) is GRANTED.
2. The motions for sanctions between Bell and Salvador are DENIED.
AND IT IS SO ORDERED.