## Facts

- Consumers who bought Chrysler vehicles also purchased Chrysler extended service contracts promising specified repair coverage and reimbursement.
- Plaintiffs alleged Chrysler secretly intended not to provide certain promised coverage and, when consumers sought reimbursement for covered repairs, Chrysler refused to pay.
- Plaintiffs alleged the scheme was implemented and administered through use of the mails and wires, constituting predicate acts of mail and wire fraud.
- Plaintiffs framed the alleged RICO enterprise as a “Chrysler family” consisting of Chrysler, its subsidiaries involved in production/financing/marketing, Chrysler dealers, and Chrysler-controlled trusts involved in reselling installment contracts.
- The alleged wrongdoing concerned marketing, selling, and administering Chrysler’s extended warranty product through its corporate and distribution structure.

## Issues

1. Whether a § 1962(c) civil RICO claim is stated when the defendant “person” (Chrysler) and the alleged “enterprise” (the “Chrysler family”) are, in substance, the same entity and its internal corporate structure.
2. Whether the complaint plausibly alleged that Chrysler conducted the affairs of a separate enterprise through racketeering activity, rather than merely conducting Chrysler’s own business affairs.

## Decision

- The Seventh Circuit affirmed dismissal under Rule 12(b)(6) for failure to state a claim under 18 U.S.C. § 1962(c).
- The court assumed without deciding that the complaint sufficiently alleged predicate acts and a pattern of racketeering activity.
- The court held the alleged enterprise was not distinct from Chrysler as required by § 1962(c).
- The court further held the allegations described Chrysler conducting its own affairs through alleged fraud, not conducting the affairs of a separate enterprise.

## Legal Principles

- A § 1962(c) claim requires distinctness between the RICO “person” and the RICO “enterprise”; the defendant that conducts the enterprise’s affairs must be separate from the enterprise itself.
- An enterprise defined as a corporation together with its subsidiaries, affiliates, dealers, and related financing vehicles generally describes the corporation’s own structure and channels of business, not a distinct enterprise for § 1962(c) purposes.
- Allegations that a company used mail or wire communications to sell and administer its own products describe the conduct of the company’s own affairs; without a distinct enterprise, such allegations do not satisfy § 1962(c)’s requirement that the defendant conduct the enterprise’s affairs through racketeering activity.
- At the pleading stage, failure to plead a distinct enterprise and enterprise conduct warrants dismissal even if predicate acts and a pattern are assumed.

## Conclusion

The court affirmed dismissal of the consumers’ civil RICO action because the complaint treated Chrysler’s corporate family and distribution network as the “enterprise,” making it indistinct from Chrysler, and because the alleged mail and wire fraud described Chrysler’s conduct of its own business rather than the affairs of a separate enterprise.


Fitzgerald v. Chrysler Corp., 116 F.3d 225 (7th Cir. 1997)