This episode's title is a parody of #92: “The Ill-Gotten Deed”. This episode finally clears up the Land around Whit's End controversy. This is Bryan Dern 's last episode to date. It's possible that the events in this episode led to the end of Margaret Faye 's tenure as mayor. The first full account of the history of Odyssey was presented in #92: “The Ill-Gotten Deed”, which concerns a book of the same name written by John Avery Whittaker. In the late 1700's and early 1800's it was inhabited by a small band of Indians according to The Odyssey Times in the Official Guide. The prime minister viewed that those elites came to power and plundered the country. Moreover, they also did money laundering to stash their ill-gotten gains abroad, safe from domestic prosecution. “They then use their political clout to get NROs. That is how they kept their plundered wealth safe.
464 U.S. 16
104 S.Ct. 296
78 L.Ed.2d 17
Joseph C. RUSSELLO, Petitioner
Argued Oct. 5, 1983.
Decided Nov. 1, 1983.
Petitioner was convicted in Federal District Court, under the Racketeer Influenced and Corrupt Organizations (RICO) chapter of the Organized Crime Control Act of 1970, of violating 18 U.S.C. §§ 1962(c) and (d) by being involved in an arson ring that resulted in his fraudulently receiving insurance proceeds in payment for the fire loss of a building he owned. The District Court also entered a judgment of forfeiture against petitioner for the amount of the insurance proceeds pursuant to 18 U.S.C. § 1963(a)(1), which provides that a person convicted under § 1962 shall forfeit to the United States 'any interest he has acquired or maintained in violation of § 1962.' The Court of Appeals affirmed.
Held: The insurance proceeds petitioner received as a result of his arson activities constitute an 'interest' within the meaning of § 1963(a)(1) and are therefore subject to forfeiture. Pp. 20 -29.
(a) Section 1963(a)(1) does not reach only 'interests in an enterprise.' Where the term 'interest' is not specifically defined in the RICO statute, it is assumed that the legislative purpose is expressed by the term's ordinary meaning, which comprehends all forms of real and personal property, including profits and proceeds. Congress apparently selected the broad term 'interest' because it did not wish the forfeiture provision to be limited by rigid and technical definitions drawn from other areas of law and because the term was fully consistent with the RICO statute's pattern in utilizing broad terms and concepts. Every property interest, including a right to profits or proceeds, may be described as an interest in something. Before profits of an illegal enterprise are divided, each participant may be said to own an 'interest' in the ill-gotten gains, and after distribution each has a possessory interest in currency or other items so distributed. Pp. 20 -22.
(b) Had Congress intended to restrict § 1963(a)(1) to an interest in an enterprise, it presumably would have done so expressly as it did in § 1963(a)(2). To construe § 1963(a)(1) to reach only interests in an enterprise would blunt the section's effectiveness in combating illegitimate enterprises and would mean that whole areas of organized crime activity would be placed beyond the reach of the RICO statute. Pp. 22-24.
(c) The fact that the Controlled Substances Act specifically authorizes the forfeiture of 'profits' obtained in illegal drug enterprises cannot be read as imposing a limitation upon § 1963(a)(1)'s broader language, particularly where the RICO statute was aimed at organized crime's economic power in all its forms, whereas the narcotics activity proscribed by the Controlled Substances Act usually generates only monetary profits. Pp. 24-25.
(d) Nor is a limiting construction of § 1963(a)(1) supported by the fact that certain state racketeering statutes expressly provide for the forfeiture of 'profits,' 'money,' 'interest or property,' or 'all property, real or personal,' acquired from racketeering, since those States presumably used such language so as to avoid narrow interpretations of their laws such as was given the federal statute in certain Federal District Court opinions. P. 26.
(e) The legislative history clearly demonstrates that the RICO statute was intended to provide new weapons of unprecedented scope for an assault upon organized crime and its economic roots, and thus was intended to authorize forfeiture of racketeering profits. The rule of lenity does not apply here, where § 1963(a)(1)'s language is clear. Pp. 26-29.
681 F.2d 952 (5th Cir. 1982), affirmed.
Ronald A. Dion, Miami, Fla., for petitioner.
Samuel A. Alito, Jr., Newark, N.J., for respondent.
Justice BLACKMUN delivered the opinion of the Court.1
This is yet another case concerning the Racketeer Influenced and Corrupt Organizations (RICO) chapter of the Organized Crime Control Act of 1970. Pub.L. 91-452, Title IX, 84 Stat. 941, as amended, 18 U.S.C. §§ 1961-1968. At issue here is the interpretation of the chapter's forfeiture provision, § 1963(a)(1), and, specifically, the meaning of the words 'any interest [the defendant] has acquired . . . in violation of section 1962.'2
* On June 8, 1977, petitioner Joseph C. Russello and others were indicted for racketeering, conspiracy, and mail fraud, in violation of 18 U.S.C. §§ 1341, 1962(c) and (d), and 2. App. 5. After a jury trial in the United States District Court for the Middle District of Florida, petitioner was convicted as charged in four counts of the indictment. The jury then returned special verdicts for the forfeiture to the United States, under 18 U.S.C. § 1963(a), of four payments, aggregating $340,048.09, made to petitioner by a fire insurance company. App. 54-57. These verdicts related to the racketeering activities charged in the second count of the indictment under which petitioner had been convicted. The District Court, accordingly, entered a judgment of forfeiture against petitioner in that amount. Id., at 58.3
Petitioner took an appeal to the former United States Court of Appeals for the Fifth Circuit. A panel of that court affirmed petitioner's criminal conviction, United States v. Martino,648 F.2d 367, 406 (1981), and this Court denied certiorari, 456 U.S. 943, 102 S.Ct. 2006, 72 L.Ed.2d 465 (1982), as to that aspect of the case. The panel, however, reversed the judgment of forfeiture. App. 64-69. The full court granted rehearing en banc on the forfeiture issue and, by a vote of 16-7, vacated that portion of the panel opinion, and then affirmed the forfeiture judgment entered by the District Court. 681 F.2d 952 (1982). Because of this significant division among the judges of the Court of Appeals, and because the Fifth Circuit majority, id., at 959, stated that its holding 'squarely conflict[ed]' with that of the Ninth Circuit in United States v. Marubeni America Corp.,611 F.2d 763 (1980), we granted certiorari. --- U.S. ----, 104 S.Ct. ----, 77 L.Ed.2d ---- (1983).1 Since then, the Seventh Circuit has issued an opinion agreeing with the Ninth Circuit. United States v. McManigal,708 F.2d 276, 283-287 (1983).
So far as the case in its present posture is concerned, the basic facts are not in dispute. The majority opinion of the en banc court described them succinctly:5
'Briefly, the evidence showed that a group of individuals associated for the purposes of committing arson with the intent to defraud insurance companies. This association in fact enterprise, composed of an insurance adjuster, homeowners, promoters, investors, and arsonists, operated to destroy properties in Tampa and Miami, Florida between July 1973 and April 1976. The panel summarized the ring's operations as follows:6
'At first the arsonists only burned buildings already owned by those associated with the ring. Following a burning, the building owner filed an inflated proof of loss statement and collected the insurance proceeds from which his co-conspirators were paid. Later, ring members bought buildings suitable for burning, secured insurance in excess of value and, after a burning, made claims for the loss and divided the proceeds' (footnote omitted).' 681 F.2d, at 953.7
Specifically, petitioner was the owner of the Central Professional Building in Tampa. This structure had two parts, an original smaller section in front and a newer addition at the rear. The latter contained apartments, offices, and parking facilities. Petitioner arranged for arsonists to set fire to the front portion. He intended to use the insurance proceeds to rebuild that section. The fire, however, spread to the rear. Joseph Carter, another member of the arson ring, was the adjuster for petitioner's insurance claim and helped him to obtain the highest payments possible. The resulting payments made up the aggregate sum of $340,043.09 mentioned above. From those proceeds, petitioner paid Carter $30,000 for his assistance.
Title 18 U.S.C. § 1962(c) states that it shall be unlawful 'for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate . . . commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.' Section 1962(d) makes it unlawful to conspire to violate § 1962(c). Section 1963(a)(1) provides that a person convicted under § 1962 shall forfeit to the United States 'any interest he has acquired or maintained in violation of section 1962.'9
The sole issue in this case is whether profits and proceeds derived from racketeering constitute an 'interest' within the meaning of this statute and are therefore subject to forfeiture. Petitioner contends that § 1963(a)(1) reaches only 'interests in an enterprise' and does not authorize the forfeiture of mere 'profits and proceeds.' He rests his argument upon the propositions that criminal forfeitures are disfavored in law and that forfeiture statutes, as a consequence, must be strictly construed.10
In a RICO case recently decided, this Court observed: 'In determining the scope of a statute, we look first to its language. If the statutory language is unambiguous, in the absence of 'a clearly expressed legislative intent to the contrary, that language must ordinarily be regarded as conclusive.' ' United States v. Turkette,452 U.S. 576, 580, 101 S.Ct. 2524, 2527, 69 L.Ed.2d 246 (1981), quoting from Consumer Product Safety Comm'n v. GTE Sylvania, Inc.,447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). See, also, Dickerson v. New Banner Institute, Inc., --- U.S. ----, ----, 103 S.Ct. 986, 990, 74 L.Ed.2d 845; Lewis v. United States,445 U.S. 55, 60, 100 S.Ct. 915, 918, 63 L.Ed.2d 198 (1980).11
Here, 18 U.S.C. § 1963(a)(1) calls for the forfeiture to the United States of 'any interest . . . acquired . . . in violation of section 1962.' There is no question that petitioner Russello acquired the insurance proceeds at issue in violation of § 1962(c); that much has been definitely and finally settled. Accordingly, if those proceeds qualify as an 'interest,' they are forfeitable.12
The term 'interest' is not specifically defined in the RICO statute. This silence compels us to 'start with the assumption that the legislative purpose is expressed by the ordinary meaning of the words used.' Richards v. United States,369 U.S. 1, 9, 82 S.Ct. 585, 591, 7 L.Ed.2d 492 (1962). The ordinary meaning of 'interest' surely encompasses a right to profits or proceeds. See Webster's Third New International Dictionary 1178 (1976), broadly defining 'interest,' among other things, as a 'good,' 'benefit,' or 'profit.' Random House Dictionary of the English Language (1979) defines interest to include 'profit,' 'welfare,' or 'benefit.' Black's Law Dictionary 729 (5th ed., 1979) provides a significant definition of 'interest': 'The most general term that can be employed to denote a right, claim, title or legal share in something.' It is thus apparent that the term 'interest' comprehends all forms of real and personal property, including profits and proceeds.13
This Court repeatedly has relied upon the term 'interest' in defining the meaning of 'property' in the Due Process Clause of the Fourteenth Amendment of the Constitution. See Perry v. Sindermann,408 U.S. 593, 601, 92 S.Ct. 2694, 2699, 33 L.Ed.2d 570 (1972) (' 'property' denotes a broad range of interests'); Logan v. Zimmerman Brush Co.,455 U.S. 422, 430, 102 S.Ct. 1148, 1155, 71 L.Ed.2d 265 (1982); Jago v. Van Curen,454 U.S. 14, 17-18, 102 S.Ct. 31, 33-34, 70 L.Ed.2d 13 (1981). It undoubtedly was because Congress did not wish the forfeiture provision of § 1963(a) to be limited by rigid and technical definitions drawn from other areas of the law that it selected the broad term 'interest' to describe those things that are subject to forfeiture under the statute. Congress selected this general term apparently because it was fully consistent with the pattern of the RICO statute in utilizing terms and concepts of breadth. Among these are 'enterprise' in § 1961(4); 'racketeering activity' in § 1961(1) (1976 ed., Supp. V); and 'participate' in § 1962(c).14
Petitioner himself has not attempted to define the term 'interest' as used in § 1963(a)(1). He insists, however, that the term does not reach money or profits because, he says: ' 'Interest,' by definition, includes of necessity an interest in something.' Brief for Petitioner 9. Petitioner then asserts that the 'something' emerges from the wording of § 1963(a)(1) itself, that is, an interest 'acquired . . . in violation of section 1962,' and thus derives its meaning from the very activities barred by the statute. In other words, a direct relationship exists between that which is subject to forfeiture as a result of racketeering activity and that which constitutes racketeering. This relationship, it is said, means that forfeiture is confined to an interest in an 'enterprise' itself. Petitioner derives support for this approach from United States v. Marubeni America Corp., supra, and from language contained in two federal district court opinions, United States v. Meyers, 432 F.Supp. 456, 461 (WD Pa.1977), and United States v. Thevis, 474 F.Supp. 134, 142 (ND Ga.1979), aff'd on other grounds, 665 F.2d 616 (CA5 1982). He also now relies on the McManigal case, supra, recently decided by the Seventh Circuit. Tr. of Oral Arg. 4.15
We do not agree. Every property interest, including a right to profits or proceeds, may be described as an interest in something. Before profits of an illegal enterprise are divided, each participant may be said to own an 'interest' in the ill-gotten gains. After distribution, each will have a possessory interest in currency or other items so distributed. We therefore conclude that the language of the statute plainly covers the insurance proceeds petitioner received as a result of his arson activities.
We are fortified in this conclusion by our examination of the structure of the RICO statute. We disagree with those courts that have felt that a broad construction of the word 'interest' is necessarily undermined by the statute's other forfeiture provisions. The argument for a narrow construction of § 1963(a)(1) is refuted by the language of the succeeding subsection (a)(2). The former speaks broadly of 'any interest . . . acquired,' while the latter reaches only 'any interest in . . . any enterprise which [the defendant] has established[,] operated, controlled, conducted, or participated in the conduct of, in violation of section 1962.' Similar less expansive language appears in §§ 1962(b) and 1964(a). '[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.' United States v. Wong Kim Bo,472 F.2d 720, 722 (CA5 1972). See United States v. Wooten,688 F.2d 941, 950 (CA4 1982). Had Congress intended to restrict § 1963(a)(1) to an interest in an enterprise, it presumably would have done so expressly as it did in the immediately following subsection (a)(2). See North Haven Board of Education v. Bell,456 U.S. 512, 521, 102 S.Ct. 1912, 1917, 72 L.Ed.2d 299 (1982); United States v. Naftalin,441 U.S. 768, 773-774, 99 S.Ct. 2077, 2081-2082, 60 L.Ed.2d 624 (1979). In the latter case, id., at 773, 99 S.Ct., at 2082, the Court said: 'The short answer is that Congress did not write the statute that way.' We refrain from concluding here that the differing language in the two subsections has the same meaning in each. We would not presume to ascribe this difference to a simple mistake in draftsmanship.17
The evolution of these statutory provisions supplies further evidence that Congress intended § 1963(a)(1) to extend beyond an interest in an enterprise. An early proposed version of RICO, S. 1861, 91st Cong., 1st Sess. (1969), had a single forfeiture provision for § 1963(a) that was limited to 'all interest in the enterprise.' This provision, however, later was divided into the present two subsections and the phrase 'in the enterprise' was excluded from the first. Where Congress includes limiting language in an earlier version of a bill but deletes it prior to enactment, it may be presumed that the limitation was not intended. See Arizona v. California,373 U.S. 546, 580-581, 83 S.Ct. 1468, 1487-1488, 10 L.Ed.2d 542 (1963). See Weiner, Crime Must Not Pay: RICO Criminal Forfeiture in Perspective, 1981 N.Ill.U.L.Rev. 225, 238 and n. 49. It is no answer to say, as petitioner does, Brief for Petitioner 17-18, that if the term 'interest' were as all-encompassing as suggested by the majority opinion of the Court of Appeals, § 1963(a)(2) would have no meaning independent of § 1963(a)(1), and would be mere surplusage. This argument is plainly incorrect. Subsection (a)(1) reaches 'any interest,' whether or not in an enterprise, provided it was 'acquired . . . in violation of section 1962.' Subsection (a)(2), on the other hand, is restricted to an interest in an enterprise, but that interest itself need not have been illegally acquired. Thus, there are things forfeitable under one, but not the other, of each of the subsections.218
We note that the RICO statute's definition of the term 'enterprise' in § 1961(4) encompasses both legal entities and illegitimate associations-in-fact. See United States v. Turkette,452 U.S., at 580-593, 101 S.Ct., at 2527-2533. Forfeiture of an interest in an illegitimate association-in-fact ordinarily would be of little use because an association of that kind rarely has identifiable assets; instead, proceeds or profits usually are distributed immediately. Thus, construing § 1963(a)(1) to reach only interests in an enterprise would blunt the effectiveness of the provision in combatting illegitimate enterprises, and would mean that '[w]hole areas of organized criminal activity would be placed beyond' the reach of the statute. United States v. Turkette,452 U.S., at 589, 101 S.Ct., at 2531.19
Petitioner stresses that 21 U.S.C. § 848(a)(2), contained in the Controlled Substances Act, 84 Stat. 1242, as amended, specifically authorizes the forfeiture of 'profits' obtained in a continuing criminal enterprise engaged in certain drug offenses. Brief for Petitioner 6-7. The Ninth Circuit in Marubeni, 611 F.2d, at 766, n. 7, placed similar reliance upon § 848(a)(2) and observed that the two statutes were passed by the same Congress in the same month. We feel, however, that the specific mention of 'profits' in the Controlled Substances Act cannot be accepted as an indication that the broader language of § 1963(a)(1) was not meant to reach profits as well as other types of property interests. Language in one statute usually sheds little light upon the meaning of different language in another statute, even when the two are enacted at or about the same time. The term 'profits' is specific; the term 'interest' is general. The use of the specific in the one statute cannot fairly be read as imposing a limitation upon the general provision in the other statute. In addition, the RICO statute was aimed at organized crime's economic power in all its forms, and it was natural to use the broad term 'interest' to fulfill that aim. In contrast, the narcotics activity proscribed by § 848 usually generates only monetary profits, a fact which would explain the use of the narrower term in § 848(a)(2).20
Petitioner, of course, correctly suggests that members of Congress who voted for the RICO statute were aware of the Controlled Substances Act. See 116 Cong.Rec. 33651 (1970) (remarks of Rep. Brotzman); id., at 1180-1182 (remarks of Sen. Thurmond); id., at 33631 (remarks of Rep. Weicker); id., at 33646 (remarks of Rep. Kastenmeier); id., at 35318 (remarks of Rep. Anderson). It is most unlikely, however, that without explanation a potent forfeiture weapon was withheld from the RICO statute, intended for use in a broad assault on organized crime, while the same weapon was included in the Controlled Substances Act, meant for use in only one part of the same struggle. If this was Congress' intent, one would expect it to have said so in clear and understandable terms.21
Petitioner also suggests that subsequent proposed legislation demonstrates that the RICO forfeiture provision of 1970 excludes profits. Brief for Petitioner 29-34. The bills to which petitioner refers, however, were introduced in order to overcome the decisions in Marubeni, Meyers, and Thevis. See, e.g., S. 2320, 97th Cong., 2d Sess. (1982). The introduction of these bills hardly suggests that their sponsors viewed those decisions as correct interpretations of § 1963(a)(1). See United States v. Gordon,638 F.2d 886, 888, n. 5 (CA5), cert. denied, 452 U.S. 909, 101 S.Ct. 3038, 69 L.Ed.2d 411 (1981). In any event, it is well settled that ' 'the views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one.' ' Jefferson County Pharmaceutical Assn. v. Abbott Laboratories, --- U.S. ----, ----, n. 27, 103 S.Ct. 1011, 1020, n. 27, 74 L.Ed.2d 882 (1983), quoting from United States v. Price,361 U.S. 304, 313, 80 S.Ct. 326, 331, 4 L.Ed.2d 334 (1960). See, also, United States v. Clark,445 U.S. 23, 33, n. 9, 100 S.Ct. 895, 902, n. 9, 63 L.Ed.2d 171 (1980).22
Neither are we persuaded by petitioner's argument that his position is supported by the fact that certain state racketeering statutes expressly provide for the forfeiture of 'profits,' 'money,' 'interest or property,' or 'all property, real or personal,' acquired from racketeering. Brief for Petitioner 8-9. Nearly all of the state statutes post-date the Meyers and Thevis district court decisions. See, e.g., Colo.Rev.Stat. § 18-17-106 (Supp.1982) (enacted in 1981); R.I. Gen.Laws § 7-15-3 (Supp.1982) (enacted in 1979). The legislatures of those States presumably employed language different from that of § 1963(a)(1) so as to avoid narrow interpretations of their laws along the lines of the narrow interpretations given the federal statute by the courts in Meyers and Thevis.
If it is necessary to turn to the legislative history of the RICO statute, one finds that that history does not reveal, as petitioner would have us hold, see Brief for Petitioner 11-21, a limited congressional intent.24
The legislative history clearly demonstrates that the RICO statute was intended to provide new weapons of unprecedented scope for an assault upon organized crime and its economic roots. Congress' statement of findings and purpose in enacting Pub.L. 91-452, 84 Stat. 922 (1970), is set forth in its § 1. This statement dramatically describes the problem presented by organized crime. Congress declared, id., at 923: 'It is the purpose of this Act to seek the eradication of organized crime in the United States . . . by providing enhanced sanctions and new remedies to deal with the unlawful activities of those engaged in organized crime.' This Court has recognized the significance of this statement of findings and purpose. United States v. Turkette,452 U.S., at 588-589, 101 S.Ct., at 2531-2532. Further, Congress directed, by § 904(a) of Pub.L. 91-452, 84 Stat. 947: 'The provisions of this title shall be liberally construed to effectuate its remedial purposes.' So far as we have been made aware, this is the only substantive federal criminal statute that contains such a directive; a similar provision, however, appears in the Criminal Appeals Act, 18 U.S.C. § 3731.25
Congress emphasized the need to fashion new remedies in order to achieve its far-reaching objectives. See S.Rep. No. 91-617, p. 76 (1969).26
'What is needed here . . . are new approaches that will deal not only with individuals, but also with the economic base through which those individuals constitute such a serious threat to the economic well-being of the Nation. In short, an attack must be made on their source of economic power itself, and the attack must take place on all available fronts.' Id., at 79.27
Senator Scott spoke of 'new legal weapons,' 116 Cong.Rec. 819 (1970), and Senator McClellan stressed the need for new penal remedies. Id., at 591-592. Representative Poff, floor manager of the bill in the House, made similar observations. Id., at 35193. Representative Rodino observed that 'drastic methods . . . are essential, and we must develop law enforcement measures at least as efficient as those of organized crime.' Id., at 35199. The RICO statute was viewed as one such 'extraordinary' weapon. Id., at 602 (remarks of Sen. Hruska). And the forfeiture provision was intended to serve all the aims of the RICO Statute, namely, to 'punish, deter, incapacitate, and . . . directly to remove a corrupting influence from the channels of commerce.' Id., at 18955 (remarks of Sen. McClellan).28
The legislative history leaves no doubt that, in the view of Congress, the economic power of organized crime derived from its huge illegal profits. See Blakey, The RICO Civil Fraud Action in Context: Reflections on Bennett v. Berg, 58 Notre Dame L.Rev. 237, 249-256 (1982). Congress could not have hoped successfully to attack organized crime's economic roots without reaching racketeering profits. During the congressional debates, the sources and magnitude of organized crime's income were emphasized repeatedly. See, e.g., 115 Cong.Rec. 5873, 5884-5885 (1969); 116 Cong.Rec. 590, 592 (1970) (remarks of Sen. McClellan). From all this, the intent to authorize forfeiture of racketeering profits seems obvious. H.R.Rep. No. 91-1549, p. 57 (1970), U.S.Code Cong. & Admin.News, p. 4007, recites that the forfeiture provision extends 'to all property and interests, as broadly defined, which are related to the violations.'29
It is true that Congress viewed the RICO statute in large part as a response to organized crime's infiltration of legitimate enterprises. United States v. Turkette,452 U.S., at 591, 101 S.Ct., at 2532. But Congress' concerns were not limited to infiltration. The broader goal was to remove the profit from organized crime by separating the racketeer from his dishonest gains. Forfeiture of interest in an enterprise often would do little to deter; indeed, it might only encourage the speedy looting of an infiltrated company. It is unlikely that Congress intended to enact a forfeiture provision that provided an incentive for activity of this kind while authorizing forfeiture of an interest of little worth in a bankrupt shell.30
We are not persuaded otherwise by the presence of a 1969 letter from the then Deputy Attorney General to Senator McClellan. See Measures Relating to Organized Crime: Hearings Before the Subcommittee on Criminal Laws and Procedures of the Senate Committee on the Judiciary, 91st Cong., 1st Sess., 407 (1969). That letter, with its reference to 'one's interest in the enterprise' does not indicate, for us, any congressional intent to preclude forfeiture of racketeering profits. The reference, indeed, is not to § 1963(a) as finally enacted but to an earlier version in which forfeiture was to be expressly limited to an interest in an enterprise. The letter was merely following the language of the then pending bill. Furthermore, the real purpose of the sentence was not to explain what the statutory provision meant, but to explain why the Department of Justice believed it was constitutional.31
The rule of lenity, which this Court has recognized in certain situations of statutory ambiguity, see United States v. Turkette,452 U.S., at 587, n. 10, 101 S.Ct., at 2531 has no application here. That rule 'comes into operation at the end of the process of construing what Congress has expressed, not at the beginning as an overriding consideration of being lenient to wrong-doers.' Callanan v. United States,364 U.S. 587, 596, 81 S.Ct. 321, 326, 5 L.Ed.2d 312 (1961). Here, the language of the RICO forfeiture provision is clear, and 'the rule of lenity does not come into play.' United States v. Turkette,452 U.S., at 588, n. 10, 101 S.Ct., at 2531, n. 10.32
We therefore disagree with the reasoning of the respective courts in the Marubeni, McManigal, Meyers, and Thevis cases, and we affirm the judgment of the United States Court of Appeals for the Fifth Circuit.31
The Solicitor General, while perceiving 'a factual distinction between Marubeni and the present case,' felt that 'the holding and reasoning of Marubeni would require the Ninth Circuit to reach the opposite result from the Fifth Circuit on the facts of the instant case.' Memorandum for United States 4, n. 3. Accordingly, he joined in the prayer that a writ of certiorari be granted.2
There may well be factual situations to which both subsections apply. The subsections, however, are clearly not wholly redundant.3
In our ruling today, we recognize that we have not resolved any ambiguity that might be inherent in the terms 'profits' and 'proceeds.' Our use of those terms is not intended to suggest a particular means of calculating the precise amount that is subject to RICO forfeiture in any given case. We hold simply that the 'interests' subject to forfeiture under § 1963(a)(1) are not limited to interests in an enterprise.
GREGORY, Chief Judge:
Gregory Aime was a successful franchise operator of several tax preparation businesses under the umbrella of JTH Tax, Inc. and SiempreTax+ LLC (together, 'Liberty Tax'). The relationship between franchisee and franchisor deteriorated, resulting in litigation that culminated in a bench trial before the district court. Aime largely prevailed and was awarded a significant sum of damages. Both parties appealed. This Court vacated a substantial portion of the damages award but upheld the judgment in Aime's favor. Upon remand, the district court recalculated damages based on our instructions. On Aime's motion, the district court subsequently amended its judgment, increasing the damages award based on purportedly new evidence. Now, once again, both parties appeal.
Aime argues the district court erred by not awarding him more, and Liberty Tax argues the district court erred by awarding him too much. In general, we are sympathetic to the district court's concerns about Liberty Tax's bad faith conduct. We find no error in the district court's denial of Aime's arguments for reinstatement of much of the original damages. But we do find error in the court's conclusion that Aime met the standard for relief based on newly discovered evidence and in the award of nominal damages. We affirm in part, reverse and vacate in part, and remand with instructions to recalculate damages in accordance with this opinion.
For purposes of factual background, we assume familiarity with the facts laid out in our prior opinion, JTH Tax, Inc. v. Aime, 744 F. App'x 787, 789-91 (4th Cir. 2018) (JTH Tax I), and provide only a summary exposition here.
Aime operated nine tax services franchises under agreements with Liberty Tax. Those agreements included the condition that Aime maintain an Electronic Filing Identification Number ('EFIN') from the IRS.
Liberty Tax agreed to purchase Aime's franchises back, and Aime agreed to apply for reinstatement of his EFIN. Liberty Tax also agreed to take charge of operating the franchises and pay for all associated expenses and liabilities, including rent and utilities. If Aime's EFIN was restored by May 8, 2016, the PSA provided that he 'shall have' the option to buy back the franchises—pursuant to a new purchase and sale agreement and subject only to Liberty Tax's 'standard sales and approval process.' If Aime successfully bought back the franchises, Liberty Tax would owe him any profits earned in the meantime. The PSA also authorized Liberty Tax to request that Aime work with his landlords to assign the leases for each franchise property to Liberty Tax, but such transfer was not immediate, and the leases initially remained in Aime's name.
Despite its obligations to Aime under the PSA, Liberty Tax immediately began to contemplate selling the franchises to another buyer. As the district court put it—making findings from the bench after trial—'the course of conduct of Liberty throughout the dispute and during the trial indicates that they never had any intention of recognizing Aime's right to repurchase the business.' Meanwhile, Aime attempted in earnest to restore his EFIN status, but it soon became apparent that he would be unable to do so by the May deadline. Nevertheless, Liberty Tax's CEO represented to Aime, through an employee, that Liberty Tax would extend the deadline for Aime's EFIN reinstatement to the end of the year. Aime represented his acceptance and continued operating under the apparent understanding that he had until the end of the year to buy back the franchises.
The parties' relationship soon deteriorated. Liberty Tax requested that Aime assign it the leases for the franchise properties, as provided for by the PSA, but the parties could not agree to terms for the assignment. At some point, Liberty Tax stopped paying its rent and utilities obligations. Eventually Aime changed the entry code used to access some of the properties, effectively denying Liberty Tax access. Liberty Tax sued in federal court, and Aime countersued. In September 2016, amidst the litigation, Aime received his new EFIN from the IRS.
After a bench trial, the district court found that Liberty Tax breached the PSA first by failing to pay franchise expenses as required. Liberty Tax also breached the covenant of good faith and fair dealing. Further, the court gave effect to the disputed extension of the buyback deadline, finding that Liberty Tax had, in fact, extended the deadline to the end of the year. And because Aime's EFIN was restored in September, the district court found that he would have invoked his buyback option if not for Liberty Tax's breach. Therefore, in addition to owing Aime damages for the unpaid expenses, the court held that Liberty Tax owed lost profits damages. The court denied Aime's remaining claims—for anticipatory breach, fraud, and punitive damages and attorneys' fees—as covered by the breach of contract claim or as otherwise unavailable. The district court calculated the total damages as $2,736,896.17.
Both parties appealed. Liberty Tax challenged the district court's judgment in favor of Aime and certain evidentiary rulings, and Aime challenged the denial of his fraud and attorneys' fees claims. This Court affirmed the district court's conclusion that Liberty Tax breached the PSA first such that Aime prevailed on his breach of contract claim. JTH Tax I, 744 F. Microsd usb 2.0 driver download. App'x at 794. We also affirmed the denial of Aime's other claims. Id. at 793-94. However, we found error concerning the buyback extension deadline. Because the offer to extend the deadline came with no new consideration, the parties never reached an enforceable agreement. Id. at 791-93. And because Aime had not obtained a new EFIN by the May deadline, he could not be awarded damages based on the option to buyback the franchises. Id. at 794. Therefore, Aime was not entitled to lost profits, and we vacated that portion of the district court's award. Id. We remanded for recalculation of damages. Id.
Upon remand, the parties agreed that the breach of contract damages totaled $248,246.27—the amount of unpaid expenses and other liabilities. Aime argued further, however, that he was entitled to separate damages on his claim for breach of the covenant of good faith and fair dealing. Aime reasoned that, because the district court found that Liberty Tax had no intention of honoring the PSA from the start, Liberty Tax effectively breached the good faith covenant at the very outset of the agreement. According to Aime, because that breach occurred at a time when it was still possible that he would become eligible to exercise his buyback option, lost profits were 'foreseeable' damages and he was entitled to the same damages previously awarded.
The district court awarded Aime the agreed-upon amount of damages on the breach of contract claim, but it denied Aime's argument for damages flowing from the breach of the implied covenant for a number of reasons. Lost profits damages were not 'reasonably certain' at the time of the breach, and Aime did not, in fact, subsequently meet the buyback deadline. Also, Aime's argument essentially positioned a breach of the covenant as an independent tort claim, which Virginia law prohibits—the claim is effectively a claim for breach of contract. However, finding the outcome 'troubling,' the district court did award Aime $5,000 in nominal damages to recognize that '[Liberty Tax] acted in bad faith throughout its negotiations with [Aime],' whereas '[Aime] acted in good faith during the period of the extension by continuing to pursue and ultimately obtain the EFIN.'
Aime filed a timely Rule 59(e) motion for reconsideration.
The district court denied Aime's motion for reconsideration seeking the original damages sum based on equitable principles. The court found the arguments procedurally barred—as they had not been raised in the course of litigation and conflicted with this Court's mandate—as well as substantively meritless. However, the district court granted Aime's motion to increase the judgment based on new evidence. It held that the damages would have been awarded as compensatory relief if they had been identified during trial, and that they were, in fact, newly discovered. Accordingly, the court amended the damages award upwards by $49,465.94.
Both parties now appeal the district court's post-remand rulings to this Court.
Aime appeals from the district court's denial of his post-judgment motion for reconsideration. Liberty Tax appeals from the district court's grant of Aime's motion to amend the judgment based on newly discovered evidence. Liberty Tax also challenges the award of $5,000 in nominal damages on Aime's claim for breach of the duty of good faith.
We review a district court's decision on a motion for reconsideration for abuse of discretion. Wojcicki v. SCANA/SCE&G, 947 F.3d 240, 246 (4th Cir. 2020). We review conclusions of law regarding the availability and calculation of damages de novo, and we review any relevant factual findings for clear error. Simms v. United States,839 F.3d 364, 368 (4th Cir. 2016).
Aime contends that the district court mistakenly believed its hands were tied as to potential remedies in the post-remand damages proceedings. The court erred, he reasons, when it concluded that disgorgement damages were unavailable. He urges us to find instead that disgorgement was the proper remedy for Liberty Tax's breach of the good faith duty, lest Liberty Tax be rewarded for its dishonest dealings. But, as unfortunate as the outcome may be for Aime, his theory fails on two separate bases.
First, after years of litigation, a bench trial, an appeal to this Court, and a damages proceeding upon remand, Aime raised disgorgement for the first time in a motion to reconsider a final judgment.
Aime protests that '[e]ven if [he] did not use the word' disgorgement 'earlier in the litigation,'
Second, Aime's argument for disgorgement damages is precluded by the mandate rule. The mandate rule is a 'more powerful version' of the law of the case doctrine. Invention Submissions Corp. v. Dudas,413 F.3d 411, 414 (4th Cir. 2005). It requires a lower court to faithfully apply the mandate of a higher court, which is controlling as to all matters within its scope. Doe v. Chao,511 F.3d 461, 464-65 (4th Cir. 2007). The rule has two dimensions: 'First, `any issue conclusively decided by this court on the first appeal is not remanded,' and second, `any issue that could have been but was not raised on appeal is waived and thus not remanded.' Id. (quoting United States v. Husband,312 F.3d 247, 250-51 (7th Cir. 2002)). Here, both aspects of the mandate rule preclude Aime's argument for disgorgement.
Aime's disgorgement theory was as follows: Liberty Tax breached the contract by acting in bad faith immediately after its consummation, and Aime was prevented from suing at that point only by Liberty Tax's deception, entitling him to disgorgement of Liberty Tax's subsequent ill-gotten profits from the franchises. But Aime's only contractual right to past profits from the franchises was an option, contingent on the necessary condition that Aime first satisfy his obligation to regain a valid EFIN by the May deadline. Aime did not do so, and this Court held that the buyback deadline was not validly extended, meaning that 'Aime wasn't entitled to damages resulting from Liberty Tax's refusal to sell back his former franchises.' See JTH Tax I, 744 F. App'x at 791-94. Aime could never have effected the option, so Liberty Tax's gains from the stores were not, in fact, 'ill-gotten.' Thus, because Aime's argument for disgorgement is based on 'Liberty Tax's refusal to sell back his former franchises,' it contradicts this Court's prior mandate. See id.
Moreover, as discussed above, Aime failed to raise his disgorgement argument to the district court during the litigation and to this Court on his previous appeal. The mandate rule 'forecloses litigation of issues decided by the district court but foregone on appeal or otherwise waived, for example because they were not raised in the district court.' Volvo Trademark Aktiebolaget v. Clark Mach. Co.,510 F.3d 474, 481 (4th Cir. 2007). Consequently, Aime's argument is procedurally barred by the mandate rule as well. See id. Aime responds that disgorgement did not 'become relevant until remand' because previously, 'Aime was awarded his full lost profits.' But this argument is self-defeating. It amounts to a concession that Aime raised a new legal theory to obtain the same damages that the district court and this Court denied him on his previous theory. '[U]nder the mandate rule[,] a remand proceeding is not the occasion for raising new arguments or legal theories.' Id.
The district court did not err in concluding that the Rule 59(e) standard and the mandate rule precluded Aime's disgorgement theory.
Next, Liberty Tax argues that the district court abused its discretion by granting Aime's motion to increase the damages award based on newly discovered evidence. It contends that Aime could have discovered the underlying evidence at issue during the litigation, meaning Rule 59(e)'s standard was not satisfied.
Where a motion for reconsideration is based on purportedly newly discovered evidence, the evidence must not have been discoverable prior to judgment by the exercise of reasonable due diligence. Boryan v. United States,884 F.2d 767, 771 (4th Cir. 1989). The moving party bears the burden of demonstrating that the evidence meets this requirement. See id.; Pac. Ins., 148 F.3d at 403 ('[T]he party `must produce a legitimate justification for not presenting the evidence during the earlier proceeding.') (quoting Small v. Hunt,98 F.3d 789, 798 (4th Cir. 1996)).
Here, upon remand, the parties stipulated to the damages that flowed from Liberty Tax's breach of contract, including costs of unpaid rent. Then, in his post-judgment motion, Aime raised a July 2018 state court judgment against him for unpaid rent on one of the franchise leases—the 'Burnside property'—to justify an increase of the damages award. Aime submitted a declaration regarding his initial discovery of the judgment in 2019, stating that he 'could not have included the . . . judgment in my damage claim at trial in this case because it did not exist at the time.' Relying solely on Aime's declaration, the district court granted the motion to amend the judgment. That decision amounts to error.
As the district court correctly noted, the judgment itself was not the 'newly discovered evidence' at issue, given that it did not exist prior to the trial in January 2017. Rather, the question was whether the underlying unpaid rent qualified as newly discovered evidence that was not previously available to Aime during the litigation. However, even after making this correct observation, the district court's analysis nevertheless considered only the judgment itself. It found that Aime met his burden under Rule 59(e) by submitting in his declaration 'that he only discovered the default judgment entered against him on March 30, 2019.' But that statement does not provide any 'legitimate justification' for not discovering and presenting the evidence of the unpaid rent during the litigation. See Pac. Ins., 148 F.3d at 403. Indeed, the declaration attests only to discovery of the judgment and makes no reference to Aime's knowledge of—or attempts at discovering—evidence of the underlying unpaid rent. Therefore, the district court erred by concluding that Aime had met his burden to show that the evidence qualified as newly discovered. See id.; Boryan, 884 F.2d at 771.
On appeal, Aime argues, effectively, that this error was harmless. He contends that he did, in fact, exercise due diligence, and the unpaid rent on the Burnside property was not discoverable because Liberty Tax failed to disclose it. Aime cites only one example of an affirmative act constituting his reasonable due diligence: a discovery request that 'Liberty Tax produce all documents regarding rent at the stores for 2016,' to which Liberty never produced any documents in response.
This single request is an insufficient showing of due diligence to satisfy Rule 59(e)'s standard as an 'extraordinary' remedy. Aime was aware of signs that Liberty Tax was not paying rent. See Boryan, 884 F.2d at 772 (affirming denial of Rule 59(e) motion where 'sufficient indicia of the [evidence at issue] existed . . . such that it could have been discovered with due diligence prior to judgment'). One of Aime's allegations from the outset of the litigation was Liberty Tax's general failure to pay rent on the franchise properties as promised. Further, Liberty Tax points to a June 2016 state court action Aime filed regarding their dispute. In that complaint, Aime alleged 'upon information and belief' that Liberty Tax was not paying rent on the Burnside property specifically. Thus, Aime believed rent was not being paid on the Burnside Property long before he received the default judgment in March 2019, the only fact attested to in his Rule 59(e) declaration.
Yet despite this awareness, Aime apparently did not use the tools of discovery to challenge Liberty Tax's non-responsiveness.
In sum, in the declaration and now on appeal, Aime does not show he exercised reasonable due diligence during the three years of litigation to discover and present evidence of unpaid rent on the Burnside property. Therefore, the district court erred by granting Aime's Rule 59(e) motion to increase the judgment.
Finally, Liberty Tax challenges the district court's award of $5,000 in nominal damages on Aime's breach of the implied covenant of good faith claim.
After trial, the district court entered judgment for Aime on two counts: 'Count 1' for breach of contract and 'Count 2' for breach of the implied covenant. The court then awarded Aime compensatory damages without distinguishing between the two separate counts. On appeal, this Court vacated the lost profits portion of the award and remanded for recalculation. Then, upon remand, Aime emphasized that he obtained a successful judgment on these two separate counts. He argued that the lost profits damages vacated by this Court were linked to Count 1, breach of contract, but that he remained entitled to the same damages via Count 2, breach of the implied covenant. The district court rejected Aime's argument, but found the outcome 'troubling,' given Liberty Tax's bad faith conduct throughout its dealings with Aime. Therefore, the district court awarded Aime $5,000 in nominal damages on his claim for breach of the good faith duty. While sympathetic to the district court's concerns about rewarding Liberty Tax's deception in this case, we find error in the award of separate damages to remedy the breach of good faith.
As the district court correctly noted, Virginia law does not recognize an independent cause of action based on the implied covenant; rather, a breach of the duty of good faith constitutes a breach of contract and therefore gives rise only to a breach of contract claim. See Charles E. Brauer Co. v. NationsBank of Va., N.A.,466 S.E.2d 382, 385 (Va. 1996).
Here, Aime's purportedly separate claims for breach of contract and breach of the implied covenant were effectively one and the same. See Charles E. Brauer Co., 466 S.E.2d at 385. Therefore, nominal damages were unavailable because Aime was awarded compensatory damages to remedy Liberty Tax's breach of contract, regardless of the finding that Liberty Tax also breached the contract by breaching the implied covenant. See Kerns, 818 S.E.2d at 785-86. The district court erred by awarding an additional $5,000 as nominal damages.
In sum, we affirm the district court's denial of Aime's motion for reconsideration of the judgment seeking disgorgement damages, and we reverse the district court's grant of Aime's motion to amend the judgment upwards based on newly discovered evidence and its award of nominal damages to remedy Liberty Tax's breach of the implied covenant. Accordingly, we vacate the post-judgment increase in damages by $49,465.94 and the award of $5,000 in nominal damages from the damages sum and remand for recalculation.
AFFIRMED IN PART, REVERSED AND VACATED IN PART, AND REMANDED WITH INSTRUCTIONS.