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UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 97-41102
LESLIE R. BONNER, Trustee of Reliance Trusts;
MARK S. LEE,
Plaintiffs-Appellants,
VERSUS
ROBERT WAYNE HENDERSON, ET AL,
Defendants.
ROBERT WAYNE HENDERSON; MARY BELL HENDERSON; A. D. HENDERSON;
GEORGE CUNYUS; M. E. McDONALD; FRANK YANTIS; STEPHEN EMBREE;
GRANT THORNTON,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of Texas
July 31, 1998
Before WISDOM, KING, and DAVIS, Circuit Judges.
PER CURIAM:
I. Introduction and Background
In the present case, we consider whether a trust constitutes
an "enterprise" for purposes of the Racketeer Influenced and
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Corrupt Organizations Act (RICO).1 We hold that it does not.
In 1941, Frania Tye Hunt created four trusts, collectively
known as the Reliance Trusts, for the benefit of her four children.
The plaintiffs, one of whom is the current trustee, and the other
of whom is one of the trust's beneficiaries, filed the present suit
against a former trustee and a host of others who allegedly
participated in the fraudulent mismanagement of the trusts. The
plaintiffs initially sought relief in state court, but voluntarily
dismissed their claims. They subsequently filed suit in federal
court, asserting claims both under RICO and state law. The
defendants moved for dismissal under Rule 12(b)(6) of the Federal
Rules of Civil Procedure on the ground that the plaintiffs had not
alleged the existence of an "enterprise" as contemplated by RICO,
and therefore could not state a colorable claim. The district
court granted the motion and declined to exercise jurisdiction over
the outstanding state law claims. We affirm.
II. Discussion
We review de novo a district court's dismissal on the
pleadings.2 The plaintiffs' RICO claims may properly be
dismissed "only if it appears that no relief could be granted
under any set of facts that could be proven consistent with the
1 18 U.S.C. § 1962.
2 Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir.
1992).
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allegations."3
RICO provides that:
It shall be unlawful for any person employed by or
associated with any enterprise engaged in, or the activities
of which affect, interstate or foreign 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.4
By the very language of the statute, the existence of an
enterprise is an essential element of a RICO claim.5 The
plaintiffs contend that the Reliance Trusts constitute an
enterprise for purposes of the statute. We are not persuaded.
The term "`enterprise' includes any individual, partnership,
corporation, association, or other legal entity, and any union or
group of individuals associated-in-fact although not a legal
entity."6 A plaintiff, therefore, may satisfy the requisite
"enterprise" element by proving either the existence of (1) a
legal entity, or (2) the existence of a group of individuals who
are associated-in-fact.7 A legal entity is one that "has
sufficient existence in legal contemplation that it can function
3 Rubenstein v. Collins, 20 F.3d 160, 166 (5th Cir.
1994)(internal quotation marks omitted).
4 18 U.S.C. § 1962(c).
5 Atkinson v. Anadarko Bank and Trust Co., 808 F.2d 438, 440
(5th Cir. 1987).
6 18 U.S.C. § 1961(4).
7 Aetna Casualty Surety Co. v. Rodco Autobody, 43 F.3d 1546,
1557 (1st Cir. 1994).
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legally, be sued or sue and make decisions through agents as in
the case of corporations."8 An association-in-fact, on the other
hand, is an ongoing organization with members functioning as a
continuing unit.9
A trust is neither a legal entity nor an association-in-
fact. In Old Time Enterprises, Inc. v. International Coffee
Corp.,10 we stated that intangible rights, such as contract
rights, cannot possibly constitute a legal entity enterprise
under RICO.11 We hold today that trusts fall within that class
of intangible rights. A trust is "a fiduciary relationship in
which one person is the holder of the title to property subject
to an equitable obligation to keep or use the property for the
benefit of another."12 Like a contract, which cannot be a legal
entity enterprise for RICO purposes, it consists essentially of
rights and duties between two or more parties. Unlike a
corporation, which can be a legal entity enterprise for RICO
purposes, it cannot litigate on its own behalf.13 As such, we
8 Black's Law Dictionary (6th ed. 1990).
9 Aetna Casualty Surety Co. at 1557.
10 862 F.2d 1213 (5th Cir. 1989).
11 Id. at 1218.
12 Black's Law Dictionary (6th ed. 1990).
13 Trustees of the Hotel Employees and Restaurant Employees
International Union Welfare Pension Fund v. Amivest Corp., 733
F.Supp. 1180, 1184 (N.D. Ill. 1990).
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have little difficulty concluding that a trust does not qualify
as a legal entity enterprise as contemplated by RICO.14
Likewise, we conclude that a trust cannot possibly qualify as an
association-in-fact enterprise. An association-in-fact consists
of personnel who share a common purpose and collectively form a
decision-making structure.15 In simple terms, a trust bears no
characteristics of an association-in-fact.
The plaintiffs' claims under RICO cannot properly lie. The
judgment of the district court is AFFIRMED.
14 Both Louisiana, the state in which the Reliance Trusts were
drafted, and Texas, the state in which the trustee has principally
resided, recognize trusts as fiduciary relationships rather than
legal entities. See La. Rev. Stat. Ann. § 9:1731 (West 1991); Tex.
Prop. Code Ann. § 111.004 (Vernon 1984).
15 Shaffer v. Williams, 794 F.2d 1030, 1032 (5th Cir. 1986).
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