                                                         F I L E D
                                                   United States Court of Appeals
                                                           Tenth Circuit

                                                         August 30, 2006
                  UNITED STATES CO URT O F APPEALS    Elisabeth A. Shumaker
                                                          Clerk of Court
                             TENTH CIRCUIT



JA M ES F. K EA RN EY ,

      Plaintiff-Appellee-Cross-
      Appellant,

v.

V IN CEN T D IM A N N A ; K EN A.
O V ERMA N ; M A RK H A N EY ;
FR AN K J. V ESSA , SR .; A N THONY
P. IAC OV ETTA; JIM M Y J. GO SE;
THOM AS S. LAHEY; JAM ES R.
SM ITH; KEN NETH C. PADGETT;
GEORGE A. GRAY; STEVEN W .
PA N CK ; PA U L M . PA ZEN ; JESUS
QUINON ES; DOU GLAS BRADER;
ANDREW A. RAM IREZ; DAVID                No. 04-1439, 04-1443
NEIL, individually and as Director of    (D.C. No. 03-CV-146)
the Police Protective Association of           (D . Colo.)
the C ity and County of D enver;
M ARTIN VIGIL, individually and as
Director of the Police Protective
Association of the City and County of
Denver; JONATHYN PRIEST; AM Y
M A RTIN , M .D .; D A V ID J. B RUNO;
BRUNO, BRUNO & COLIN , P.C.;
M ICHAEL STACK, individually and
as an Officer and Director of the
Police Protective Association of the
City and County of D enver;
BERNARDO ARABALO, individually
and as an Officer and Director of the
Police Protective Association of the
C ity and C ounty of D enver; JO HN
W YCKOFF, individually and as an
 Officer and Director of the Police
 Protective Association of the City and
 County of Denver; KIRK M ILLER,
 individually and as an Officer and
 Director of the Police Protective
 Association of the City and County of
 Denver; KEN NETH CH AV EZ,
 individually and as an Officer and
 Director of the Police Protective
 Association of the City and County of
 Denver; M AR CO K. VA SQUEZ;
 M ICHA EL Q U IN O N ES; TH O M AS
 DAVID SANCHEZ; DAVID
 A BRAM S; G ER ALD R. WH ITM AN;
 TIM OTHY LEARY; DAVID
 TH OM AS; STEV EN EV ANS;
 W ILLIAM M ITCHELL,

           Defendants-Cross-Appellees,

 and

 PO LIC E PR OTEC TIV E
 A SSO CIA TIO N O F TH E C ITY AND
 COUNTY OF DENVER,

           Defendant-Appellant-Cross-
           Appellee.



                            OR DER AND JUDGM ENT *


Before BR ISC OE, M cKA Y, and EBEL, Circuit Judges.



       *
       This Order and Judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

                                          -2-
      James Kearney, a private investigator, brought this civil claim under the

Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.

§§ 1961–68, against thirty-four individual defendants, a law firm, and a non-

profit corporation (collectively, “Defendants”). The district court granted

motions by all Defendants to dismiss for failure to state a claim, but denied a

motion by one Defendant for sanctions against Kearney. W e affirm the dismissal

of K earney’s claims but reverse and remand on the issue of sanctions.

                               I. BACKGROUND 1

      On September 29, 1999, a SW AT team from the Denver Police Department

entered Ismael M ena’s residence pursuant to a “no-knock” search warrant that

mistakenly listed M ena’s address instead of the “crack house” next door. During

the raid, M ena was shot and killed. Although there was an initial cover-up, the

fact that the SW AT team had raided the wrong house was anonymously leaked to

the media and publicized in November 1999.

      An attorney for M ena’s family hired Plaintiff Kearney, a former F.B.I.

agent, to investigate the killing. Kearney investigated and concluded that M ena

had been unarmed and that the SW AT team members had initially shot him solely




      1
       Because the district court granted Defendants’ motions to dismiss under
Fed. R. Civ. P. 12(b)(6), we recite the facts as alleged in the complaint and
assume for purposes of this appeal that they are true. See Elliott Indus. Ltd.
P’ship v. BP Am. Prod. Co., 407 F.3d 1091, 1123 (10th Cir. 2005).

                                        -3-
because they overreacted to the situation. Kearney further concluded that when

the SW AT team members realized that they had raided the wrong house and

nearly killed an unarmed man, they decided to cover up the truth: the SW AT team

shot M ena again, killing him, then altered the crime scene to look as if M ena had

been shooting at them. According to Kearney, the police department then

engaged in a two-month cover-up of the true nature of M ena’s death.

      Kearney attempted to convince both a special prosecutor and the F.B.I. of

his conspiracy theory, but was essentially ignored. He therefore began to

publicize his allegations during appearances on a Denver radio talk show.

Defendants realized that Kearney posed a threat as a potential expert witness

against them and began to discuss how to silence him. Eventually, the Police

Protective Association of the City and County of Denver (“PPA”) and its

members conspired with attorney David Bruno and his law firm to intimidate

Kearney by filing a defamation lawsuit against Kearney, the talk show host, and

the radio station. The PPA funded the lawsuit, Bruno represented the defamation

plaintiffs, and many Defendants participated by giving false or misleading

deposition testimony. After the radio station and talk show host agreed to settle

the case, Defendants voluntarily dismissed the entire defamation law suit,

including all claims against Kearney — who had refused to settle. Kearney

nonetheless alleges that the lawsuit “injured him professionally, personally, and

economically, and his [sic] business and business reputation.”

                                         -4-
      K earney thereafter filed the present suit against Defendants, alleging RICO,

RICO conspiracy, and state law claims. The district court granted D efendants’

motions to dismiss Kearney’s RICO claims under Rule 12(b)(6) because: (1) he

“failed to show that he has standing to pursue the RICO claims”; (2) his

“definition of the criminal enterprise is not different from his allegations of a

pattern of racketeering activity”; (3) he lacked “support for a valid claim of an

effect on interstate commerce”; and (4) “[t]he conspiracy claim is insufficient

because the . . . RICO violations . . . have not been adequately alleged.” Because

there were no remaining federal claims, the district court dismissed Kearney’s

state law claims under Rule 12(b)(1) for lack of jurisdiction.

      During the litigation, Defendant PPA sought Rule 11 sanctions against

Kearney. The district court, however, declined to separate the federal claims

from the unresolved state law claims for sanctions purposes and therefore denied

the request. PPA appeals the denial of its motion for sanctions and Kearney

cross-appeals the dismissal of his RICO and RICO conspiracy claims.

                                 II. D ISC USSIO N

      A . D ismissal of Kearney’s RICO Claim s

      As explained above, the district court dismissed Kearney’s RICO and RICO

conspiracy claims (together, “R ICO claims”) on numerous grounds. Because w e

agree that Kearney failed to plead an enterprise distinct from the pattern of

racketeering activity, we need not address the other grounds for dismissal.

                                         -5-
             1. Standard of review

      W e review de novo the district court’s grant of a motion to dismiss for

failure to state a claim. Sutton v. Utah State Sch. for the Deaf and Blind, 173

F.3d 1226, 1236 (10th Cir. 1999). In our review, we accept all well-pleaded

factual allegations as true and view them in the light most favorable to the

nonmoving party. Id. at 1236. “A 12(b)(6) motion should not be granted unless

it appears beyond doubt that the plaintiff can prove no set of facts in support of

his claim which w ould entitle him to relief.” Id. (quotation omitted).

             2. Enterprise

      Subsection 1962(c) of RICO makes it

      unlawful for any person employed by or associated w ith 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 unlaw ful debt.

18 U.S.C. § 1962(c). Subsection 1962(d) makes it “unlaw ful for any person to

conspire to violate” subsection 1962(c). Id. § 1962(d). RICO provides a private

civil cause of action for those w ho are injured by violations of § 1962 and allow s

for recovery of treble damages, costs, and attorney fees. Id. § 1964(c).

      “To successfully state a RICO claim, a plaintiff must allege four elements:

(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.”

Robbins v. W ilkie, 300 F.3d 1208, 1210 (10th Cir. 2002) (quotation omitted).

The second RICO element, an enterprise, “includes any individual, partnership,

                                         -6-
corporation, association, or other legal entity, and any union or group of

individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4).

Despite the apparent breadth of this definition, to properly plead an enterprise a

plaintiff must allege three components: (1) that there is “an ongoing organization

with a decision-making framew ork or mechanism for controlling the group,” (2)

“that various associates function as a continuing unit,” and (3) “that the enterprise

exists separate and apart from the pattern of racketeering activity.” United States

v. Smith, 413 F.3d 1253, 1266–67 (10th Cir. 2005) (quotations omitted).

      W e conclude that Kearney has failed to allege the third component —

existence of an enterprise “separate and apart from the pattern of activity in which

it engages.” U nited States v. Turkette, 452 U.S. 576, 583 (1981). Kearney’s

amended complaint merely states, in relevant part:

      This Complaint’s foundational claim s are abuse of legal process and
      malicious prosecution of KEARNEY by the SW AT Team defendants
      with the direct assistance and aid of the other defendants . . . .

      At all relevant times, the defendants acted as a group of persons
      associated together in fact for the common purpose of maliciously
      prosecuting KEARNEY, and thereby abusing legal process, obstructing
      justice, and conspiring to comm it and committing perjury. Therefore,
      their conduct as such constitutes an association-in-fact “enterprise”
      within the meaning of RICO . . . .

Compl. at 49–50.

      It is clear from these assertions that the alleged enterprise and the alleged

pattern of racketeering activity are the same. Kearney claims that the Defendants



                                         -7-
associated in fact to obstruct justice by maliciously prosecuting him, but there is

no indication that the “association” had any existence or purpose outside of the

alleged malicious prosecution and intimidation of Kearney to prevent him from

continuing to expose the supposed illegal activity and cover-up pertaining to

M ena’s death. See United States v. Cianci, 378 F.3d 71, 82 (1st Cir. 2004)

(“[C]riminal actors who jointly engage in criminal conduct that amounts to a

pattern of ‘racketeering activity’ do not automatically thereby constitute an

association-in-fact RICO enterprise simply by virtue of having engaged in the

joint conduct. Something more must be found— something that distinguishes

RICO enterprises from ad hoc one-time criminal ventures.”); M ontesano v.

Seafirst Commercial Corp., 818 F.2d 423, 427 (5th Cir. 1987) (“[I]ndividuals who

join together for the commission of one discrete criminal offense have not created

an ‘association-in-fact’ enterprise, even if they commit two [or more] predicate

acts during the commission of this offense, because their relationship to one

another has no continuity.”). Simply put, Kearney’s allegations fail to show that,

in the absence of the alleged malicious prosecution and scheme of intimidation

against him, there would have been any association-in-fact at all among the

Defendants. See Handeen v. Lemaire, 112 F.3d 1339, 1352 (8th Cir. 1997) (“In

assessing whether an alleged enterprise has an ascertainable structure distinct

from that inherent in a pattern of racketeering, it is our normal practice to

determine if the enterprise would still exist were the predicate acts removed from

                                          -8-
the equation.”). Therefore, Kearney has failed to properly plead an enterprise, 2

and his RICO claims were properly dismissed. 3

      B. Rule 11 Sanctions

      W e now turn to the second issue in this case: whether the district court

properly denied Defendant PPA’s motion for sanctions against K earney. W e

conclude that the denial was improper and remand for further consideration.

             1. Standard of review

      “All aspects of the district court’s Rule 11 determination are reviewed for

abuse of discretion, which is shown if the district court based its ruling on an




      2
        In his response to Defendants’ motions to dismiss, Kearney claimed that
“the Denver Police Department and those closely affiliated with it is the
enterprise.” On appeal, he asserts that there were four enterprises: the Bruno law
firm, the PPA, the Denver Police Department, and the association-in-fact of all
Defendants. W e decline to consider these claims because they were not pleaded
in the complaint. “It is well-established . . . that in determining whether to grant
a motion to dismiss, the district court, and consequently this court, are limited to
assessing the legal sufficiency of the allegations contained within the four corners
of the complaint.” Jojola v. Chavez, 55 F.3d 488, 494 (10th Cir. 1995); see also
Car Carriers, Inc. v. Ford M otor Co., 745 F.2d 1101, 1107 (7th Cir. 1984) (“[I]t is
axiomatic that the complaint may not be amended by the briefs in opposition to a
motion to dismiss.”).
      3
        Because dismissal of Kearney’s § 1962(c) claim was proper, dismissal of
his RICO conspiracy claim was therefore also proper. See Tal v. Hogan, 453 F.3d
1244 at 1270 (10th Cir. 2006) (“By its terms, § 1962(d) requires that a plaintiff
must first allege an independent violation of subsections (a), (b), or (c), in order
to plead a conspiracy claim under subsection (d).”); Condict v. Condict, 826 F.2d
923, 927 (10th Cir. 1987) (“[A]ny claim under § 1962(d) based on a conspiracy to
violate the provisions of 18 U.S.C. § 1962(a), (b), or (c) must necessarily fall if
the substantive claims are themselves deficient.”).

                                         -9-
erroneous view of the law or on a clearly erroneous assessment of the evidence.”

Barrett v. Tallon, 30 F.3d 1296, 1301 (10th Cir. 1994) (quotation omitted).

             2. Analysis

      The district court denied PPA’s motion for sanctions against Kearney,

concluding that

      [t]he insufficiency of the federal claims does not warrant a determination that
      sanctions should be imposed. That would require a separation of the federal
      claims from the state claims and this court has no basis for determining that
      none of the state claims made against PPA could be supported by evidence if
      those claims w ere fully litigated. This court has no basis for making a Rule
      11 determination with respect to the state law claims and is unwilling to
      separate them for this purpose.

W e agree with the PPA that the district court made “the erroneous legal

assumption that the sanction analysis for the dismissed federal claims . . . was

somehow dependent on either the validity or the adjudication of the state law

claims.”

      Subdivision (b) of Rule 11 provides, in relevant part, that

      [b]y presenting to the court (whether by signing, filing, submitting, or later
      advocating) a pleading, written motion, or other paper, an attorney . . . is
      certifying that to the best of the person’s knowledge, information, and belief,
      formed after an inquiry reasonable under the circumstances,--
             ...
             (2) the claims, defenses, and other legal contentions therein are
             warranted by existing law or by a nonfrivolous argument for the
             extension, modification, or reversal of existing law or the establishment
             of new law; [and]
             (3) the allegations and other factual contentions have evidentiary
             support or, if specifically so identified, are likely to have evidentiary
             support after a reasonable opportunity for further investigation or
             discovery; . . . .

                                        -10-
Fed. R. Civ. P. 11(b). Rule 11 further provides that “[i]f, after notice and a

reasonable opportunity to respond, the court determines that subdivision (b) has

been violated, the court may . . . impose an appropriate sanction upon the

attorneys, law firms, or parties that have violated subdivision (b) or are

responsible for the violation.” Id. at 11(c).

      In Dodd Insurance Services, Inc. v. Royal Insurance Company of America,

935 F.2d 1152 (10th Cir. 1991), we noted a circuit split as to the proper

interpretation of Rule 11:

      Some courts have interpreted Rule 11 narrowly, suggesting that
      sanctions are inappropriate when a pleading contains both valid and
      frivolous claims. See, e.g., FDIC v. Tekfen Constr. & Installation Co.,
      847 F.2d 440, 444 n.6 (7th Cir. 1988) (“[E]ven if this minor argument
      were off the mark, the fact that one argument in an otherwise valid
      paper is not meritorious” does not warrant Rule 11 sanctions.); Burull
      v. First Nat’l Bank of M inneapolis, 831 F.2d 788, 789 (8th Cir. 1987)
      (lawsuit containing meritless and factually groundless claims did not
      mandate Rule 11 sanctions because complaint, “taken as a whole, was
      legally and factually substantial enough to reach a jury”), cert. denied,
      485 U.S. 961 (1988); Golden Eagle Distrib. Corp. v. Burroughs Corp.,
      801 F.2d 1531, 1540 (9th Cir. 1986) ( “Rule [11] permits the imposition
      of sanctions only when the ‘pleading, motion, or other paper’ itself is
      frivolous, not when one of the arguments in support of a pleading or
      motion is frivolous.”). O ther courts interpret Rule 11 more broadly,
      finding that it may be violated by a pleading containing a single
      frivolous claim. See, e.g., Cross & Cross Properties v. Everett Allied
      Co., 886 F.2d 497, 504 (2d Cir. 1989) (“[T]o adopt a standard that
      would deny sanctions for a significant and obviously meritless claim
      simply because the rest of the pleading was sound strikes us as contrary
      to this court’s established reading of Rule 11.”); Patterson v. Aiken, 841
      F.2d 386, 387 (11th Cir. 1988) (“Rule 11 does not prevent the
      imposition of sanctions where it is shown that the Rule was violated as
      to a portion of a pleading, even though it was not violated as to other
      portions.”); Frantz v. United States Pow erlifting Fed’n, 836 F.2d 1063,

                                         -11-
      1067 (7th Cir. 1987) (“R ule 11 applies to all statements in papers it
      covers. Each claim m ust have sufficient support; each must be
      investigated and researched before filing.”).

Id. at 1158. W e chose in Dodd to follow the broader interpretation of Rule 11

and therefore held “that a pleading containing both frivolous and nonfrivolous

claims may violate Rule 11.” Id. W e firmly stated that “[t]o conclude otherwise

would allow a party with one or more patently meritorious claims to pepper his

complaint with one or more highly advantageous, yet wholly frivolous, claims, for

that party would be assured that the weight of his meritorious claim(s) would

shield him from sanctions.” Id. (quotation omitted).

      W e conclude that Dodd is controlling in this case. The district court

essentially declined to consider whether the insufficiency of Kearney’s RICO

claims merited sanctions because it was unwilling to “separat[e]” those claims

from Kearney’s other — potentially meritorious — state-law claims. Yet Dodd

specifically held that proper application of Rule 11 requires evaluating claims

individually for sanctions purposes. This comports with the plain language of the

Rule, which speaks in terms of “claims” and “legal contentions.” Fed. R. Civ. P.

11(b)(2). Each claim must be individually evaluated and the merit, or potential

merit, of one legal claim does not diminish the command of Rule 11 that each

claim have the necessary legal support.

      Kearney argues that the district court’s refusal to separate the claims was

proper because his state-law claims were “at the heart” of his RICO claims. W e

                                          -12-
do not think that relatedness matters. Although there are, not surprisingly, many

similarities between the state and federal causes of action asserted by Kearney,

RIC O contains special requirements that do not apply to the state law claims.

Therefore, even if Kearney were to prevail on his state-law claims, that would be

quite irrelevant to the question of whether the federal claims — with their unique

requirements — were warranted and nonfrivolous.

      W e emphasize that our decision, of course, should not be taken as a

conclusion that sanctions are merited in this case; that is a decision for the district

court to make in the first instance. Our conclusion is simply that the district court

“based its ruling on an erroneous view of the law,” Barrett, 30 F.3d at 1301

(quotation omitted), and thereby abused its discretion. Consequently, we remand

for the district court to address whether sanctions are merited.

                                 III. C ON CLU SIO N

      For the foregoing reasons, we AFFIRM the dismissal of Kearney’s RICO

claims but REVERSE the district court’s decision on sanctions and REM AND for

a determination of whether sanctions are merited.



                                        ENTERED FOR THE COURT



                                        David M . Ebel
                                        Circuit Judge



                                          -13-
