Antitrust Law Daily Wrap Up, RICO—NDWVa: RICO Claims Against African Adoption Organization for Failed Adoption Rejected, (Mar 12, 2013)

By Tobias J. Gillett, J.D., LLM.

A couple that had attempted to adopt a Ugandan child through a non-profit organization failed to assert Racketeer Influenced and Corrupt Organization (RICO) Act claims against the organization and its principal after their adoption fell through, allegedly due to misconduct by the organization and its employees, the federal district court in Wheeling, West Virginia has ruled (Heslep v. Americans for African Adoption, Inc., March 11, 2013, Keeley, I.). The couple did not establish the existence of a RICO enterprise distinct from the organization’s employees.

Americans for African Adoption, Inc. (AFAA) is an Indiana non-profit organization. In 2007, AFAA sought to incorporate itself in Uganda to take advantage of a new Ugandan policy permitting foreign adoption. James and Carey Heslep agreed to adopt a Ugandan boy through AFAA’s process, under which they first sponsored the boy for $200 per month. AFAA’s principal informed the Hesleps that both of the boy’s parents were dead, but AFAA allegedly had not performed any investigation of his orphan status.

Nearly two years later, the Hesleps terminated their relationship with AFAA, giving as reasons the principal’s “poor communication and financial mismanagement of AFAA.” The Hesleps sought to advance their adoption of the Ugandan boy without AFAA, and obtained legal guardianship of him through a Ugandan court.

However, when the Hesleps applied through the U.S. Embassy in Uganda for an IR-4 visa for the boy, the Embassy refused their application and froze all AFAA-facilitated adoptions in Uganda. The Embassy had determined that Ugandan citizens the AFAA had worked through had “forged documents related to the death certificates” of the boy’s parents. The United States Citizenship and Immigration Service also declined their application for his entry into the United States through an I-600 Petition to Classify Orphan as an Immediate Relative, concluding that the Hesleps had not established the boy’s status as a true orphan. The Hesleps performed their own investigation, which confirmed that the boy was not an orphan, and relinquished him to his maternal grandmother.

The Hesleps filed suit against the AFAA, its principal, and the AFAA’s board of directors, asserting violations of the RICO Act, among other claims, although the board of directors were later dismissed. The present decision addressed the defendants’ motion for summary judgment.

The court initially explained that a RICO claim required the plaintiff to establish four elements: “(1) conduct (2) of an ‘enterprise,’ (3) through a pattern (4) of racketeering activity.” A plaintiff must show both “(1) a ‘person’; and (2) an ‘enterprise’ that is not simply the same ‘person’ referred to by a different name.” The defendants must have “participated in the conduct of the ‘enterprise’s affairs,’ not just their own affairs.”

The court concluded that the Hesleps failed to establish a legally distinct RICO enterprise. The Hesleps had alleged that the AFAA was the “person” for RICO purposes, and an “association in fact” of the AFAA, the AFAA’s principal, the AFAA board members, and an AFAA Ugandan contact was the “enterprise.” The court distinguished this situation from that in the Supreme Court’s 2001 decision in Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, which held that the distinctiveness requirement was satisfied when a “corporate employee unlawfully conducts the affairs of the corporation of which he is the sole member.”

“[T]o fall squarely within the four corners of Cedric Kushner,” the Hesleps would have had to allege that an AFAA employee was the “person,” and the AFAA was the “enterprise,” the court noted.

Moreover, the Hesleps had not provided evidence to demonstrate that the members of the alleged “association in fact” had “acted with a common purpose and therefore was distinct from AFAA.” Instead, the Hesleps repeatedly referred to the members as acting within the scope of their employment, and attributed their actions to AFAA. The Hesleps had merely “accuse[d] AFAA of conducting its own affairs” rather than “those of a distinct enterprise,” in the court’s view, and had not provided evidence “that would tend to establish that the constituents of the association actually shared a common purpose and maintained an existence that was in any way distinct from AFAA itself.” Therefore, the court granted summary judgment to the defendants.

The court also granted summary judgment to the defendants on a claim for intentional infliction of emotional distress, but denied summary judgment on claims for fraud, negligent hiring, and negligent retention.

The case is Civil Action No. 1:11CV56.

Attorneys: Richard W. Weston (Weston Law Office) for James William Heslep. Marjorie Anne McDiarmid (West Virginia University College of Law) for Americans for African Adoptions, Inc.

Companies: Americans for African Adoptions, Inc.

Cases: RICO WestVirginiaNews