The Honor able Jed S. Rakoff, United States District Judge f or the Southern District of * New Y ork, sitting by

desig nation. 09 -14 45 -cv Mc Br ea rty v . T he Vanguar d Group, Inc . 1 UN ITED STA TES C OU RT OF AP P EA LS 2 F OR THE SE CO ND CI RC UI T 3 4 SUM M AR Y O RD ER 5 6 RU LIN G S BYSUM M AR Y O RD ER

DO NO T HA VE P RE CEDEN TIA L EF F EC T. 7 CI TA TIO N T O SUM M AR Y ORD ER S F ILED AF TER JA NU AR Y 1 , 2 00 7, IS P ERM ITTE D 8 AN D I S G OV ERNE D B Y T HIS C OU RT ’S LOC AL RU LE 3 2. 1 A ND F ED ER AL RU LE OF 9 AP P ELLA TE P RO CE DU RE 32 .1 . I N ABRIEF OR OT HER P AP ER IN WHI CH A 10 LITI G AN T C ITES A SU M M AR Y O RD ER , I N E AC H P AR AG RA P H IN WHIC H A 11 CI TA TION APP EA RS, A T LEA ST ON E C ITA TIO N M UST EITH ER BE TO THE 12 F ED E RA L APP ENDIX OR BE ACCOMP ANIED BY THE NOT ATION: “(SUMM ARY 13 ORDER).” A P ARTY CITINGA SUMMA RY ORDER M UST S ERVE A COP Y OF THAT 14 SUMMAR

Y ORDER TOGETHER W I T H T HE PAP ER IN WHICH THE SUMMAR Y 15 OR

DE R I S CI TED ON AN Y P AR TY NO T RE P RE SEN TED BY CO UN SEL U NL ESS TH E 16 SUM M AR

Y O RD ER

IS A VA ILA BLE I N A N E LEC TR ON IC DA TAB AS E WH IC H IS 17 P UB LIC LYAC CE SSIBL E WI THOU T P AY M EN T OF F EE ( SUC H A S THE D AT AB ASE 18 AVAI LA BLE A T HTTP :/ /WW W. CA 2. USC OU RT S.G OV/) . I F NO CO P Y I S SER VE D B Y 19 RE ASO N O F THE A VA ILA BILI TYOF THE O RD ER ON SUC H A DAT AB AS E, T HE 20 CI TA TIO N M UST IN CL UD E REF EREN CE TO THA T DA TA BA SE AN D THE D OC KET 21 NUMBER OF THE CASE IN WHICH THE ORDER WAS ENTERE D. 22 23 At a stated te rm of the United States Court of A ppeals for the Second Circuit, held at the 24 United States Courthouse, 500 Pear l Street, in the City of Ne w York, on the 23 day of rd 25 November , two thousand nine. 26 27 PRES ENT: 28 HO N. RA L PH K . WI NT ER, 29 HO N. RO SEM AR Y S. POO L ER, 30 Cir c uit Judg e s, 31 HON . J ED S . RAKO FF, 32 District J udg e. * 33 34 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 35 DEANN A MCBREARTY, MARYLYNN HA RTSEL , 36 individually , derivatively , and on beha lf of all other s 37 simil arly

situated, 38 39 Pla int if fs -A pp e lla nts , 40 41 -v.- No. 09-1445-c v2 1 TH E V AN GUARD G RO UP, I NC ., GE OR GE U. SAU TE R, 2 DUANE F. KE L L Y, J OHN J. BRENNAN, CHA RL ES D. 3 EL L I S, RAJ I V L . GUPTA, AMY GU TMANN, JOANN 4 HE F F ERN ANHE I SEN , A ND RE F . PE RO L D, AL F RED M. 5 RANKI

N J R., J . LAWRENCE W I L SON, ACADIAN ASSET 6 MA

NA GE MENT , L L C, R ON AL D D . F RA SHU RE, JOHNR. 7 CHI SHOL M, BRIAN K. WOLAHAN, MA RATHON ASSET 8 MA

NA GE MENT , L L P and

NE I LM. OST RER , 9 10 De fe nd ants -A pp e lle e s, 11 12 VA

NG UA RD I

NT ERN AT I ON AL

EQ UI TYI

ND EX F UN DS, 13 D/B/A V ANGUA RD EUROPEAN STOCK I NDEX F UND, 14 VA

NG UA RD HO RI Z ONF UN DS, D/ B /AVA NG UA RD 15 GL OB AL

EQUI TY F UND, 16 17 No min a l D e fe nd ants -A pp e lle e s, 18 19 AL L IANCE B ERNSTEI N L P, HENRY S. D’AURIA, 20 SHARON E. FA Y, KEVI N F. SI MMS, W I L L IAM J . ARAH 21 and JER EMY H. HOSKI NG, 22 23 De fe nd ants

. 24 25 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 26 27 Appea

ringfor Appe llants: THOMAS I . SHERI DAN, I I I(Andre a B ierstein, on the 28 brief) , Hanly Conroy Bie rstein Sheridan F isher & Hayes 29 L L P, New Yor k, New Y ork. 30 31 Appea

ringfor Appe llees: HARRY A. OL I VAR, J R. (A. Will iam Urquha rt and 32 J asmine M. Starr, Quinn Ema nuel Urquha

rt Oliver & 33 Hedg es, L L P, L os Ang eles, California ; David B raf f, Penny 34 Sha ne , a nd Am and a F . D avid of

f, Sul liv an & Cr omw e ll 35 L L P, New Yor k, New Y ork; Kenne th S. L eonetti, B randon 36 F. White, and Kirk G . Hanson, F oley HoagL L P, Boston, 3 7 M a s s a c hu s e t t s ; R o b e rtM

. D at o , M i c h a e l C e r e s e t o , an d L. 38 Ric ha rd Wal ton , B uc ha lte r N e me r, PC, L os An g e le s, 39 California, on the br ief), Q uinn Emanuel Urquha rt Oliver & 40 Hedg es, L L P, L os Ang eles, California

. 41 42 Appea l from the United States District Court for the Southern District of Ne w York 43 (De nise L . Cote, J udg e).3 1 2 UP ON DUE CONSIDERATION, IT IS HEREB Y ORDERED, ADJUD GED, A ND 3 DECREED that th e jud g me nt o f t he dis tr ic t c ourt

is AF F IRM ED

. 4 5 Plaintiffs-appellants a ppeal a judgme nt entere d on April 6, 2009 in the United States 6 District Court for the Southern D istrict of NewYork (Cote, J.) dismis sing w ith prejudice 7 plaintiffs’ cla ims under the Rac ketee r Influenc ed and Corr upt Org anizations Act, 18 U.S.C. § 8 1961 et seq. (“ RI CO”). Plaintiffs we re sha reholde rs in cer

tain of def

endants’ mutual f

unds that 9 had invested in online g ambling c ompanies. They broug ht this civil RI CO action af ter the sha

res 10 of these online g ambling c ompanies dec lined in value followinga g overnme nt cra ckdown on 11 illega l offshore g ambling. We a ssume g ener al familiarity with the underly

ing f acts, proc edura l 12 history , and issues on appe al. 13 We r e vie w d e no vo the dis tr ic t c ourt ’s g ra nt o f a mot ion to d ism iss , ta

kin ga ll r e a so na

ble 14 infere nces in plaintiffs’ favor . City of N.Y. v. Smokes-Spirits.com, Inc., 541 F .3d 425, 439 (2d 15 Cir. 2008). 16 To state a c ivil R I CO claim, plaintiffs must show that they wer e injured “ by

rea son of” 17 the alleg ed ra ckete eringactivity , 18 U.S.C. § 1964(c), that is, that the def endant’ s RI CO violation 18 proxi mately

cause d plaintiffs’ injuries. See Anza v. I deal Steel Supply Corp., 547 U.S. 451, 457 19 (2 00 6) ; H olm e s v . Se c . Inv e sto r P ro t. C or p. , 5 03 U. S. 2 58 , 2 67 -6 8 ( 19 92 ); se e a lso Smo ke s2 0 S p i r i t s , 5 4 1 F

. 3 d at4 4 0

- 4 1 ; Le r

n e r v . F l e e tB an k , N

. A

. , 3 1 8 F

. 3 d 1 1 3 , 1 2 1

- 2 2 ( 2 d

C i r . 2 0 0 3 )

. In 21 the RI CO c onte xt, pr oximate c a us atio n me ans , in

tur n, that “ the a lle g e d v iol atio n le d d ir e c tly to 22 the plaintiff’s injuries.” Anza, 547 U.S. at 461. Her e, howe ver, the complaint alleg es that the 23 decline in the f

unds’ online g ambling holding s was not the dire ct re sult of the RI CO violation -- 24 the owningand/or fina ncingof illeg al g ambling - - but rathe r wa s the result of the subse quentAlthough f orese eability

is often the test of pr ox imate ca usation at common law, see 1 Palsgr af v. L ongI sland R.R. Co., 162 N.E. 99, 100 (N.Y. 1928), RI CO causation is a conce pt d i s t i n ctfr o m“p ro x i m at e c au s at i o nas th att ermi s u s edatco m m o nl aw . ” A b ra h am s v . Yo un g & Rubicam Inc., 79 F .3d 234, 237 (2d Cir. 1996). Although pla intiffs argue that Amer ican Express is underc ut by the Supreme Court’s 2 rec ent dec ision in Bridg e v. Phoenix Bond & I ndemnity Co., 128 S. C t. 2131 (2008), we do not ag ree . The c ivil R I CO action in Br idge was brought by regular bidder s at a c ounty ’s auc tions of tax l iens, who alleg ed that the de fenda nts, also regular bidder s, were able to obtain a disproportionate shar e of va luable liens by lying to the c ounty

about their status as “ related entities” in order

to circumve nt a rule that would otherwise r esult in a more e quitable distribution of lie ns . I d. at 21 35 -3 6. Thus , th e inj ur y a lle g e d in

B ri dg e -- the pla int if

fs ’ i na bil ity to o bta in valuable liens to whic h they would otherwise ha

ve bee n entitled -- r esulted direc tly from the f r a u d u l e n tr e p r e s e n t at i o n s th atc o n s t i tu t e d th e r a c k e t e e r i n ga c t i v i ty. These c onsiderations ar e: “( 1) the fa ctual diffic ulty of mea suringindirect damag es and 3 distinguishing a

mong distinct indepe ndent ca usal fac tors; (2) the c omplex ity of appor tioning damag es amongplaintiffs ‘to obviate the r isk of multipl e re cover ies’; and ( 3) the fa ct that ‘the need to grapple with these problems is simply unjustified by

the g ener al intere st in deterring injurious conduct, since dire ctly injured victims can g ener ally be counte d on to vindicate the law.’” Smokes-Spirits, 541 F.3d at 440 (quotingHolmes, 503 U.S. at 269). 4 1 “g overnme nt cra ckdown” on the illeg al g ambling. A lthough plaintiffs c ontend that the law 2 enfor ceme nt cra ckdown wa s a for esee able r isk of defe ndants’ ac tiviti es (r ather than a 3 superve ning c ause) , we ha ve alr eady

held that proxim ate c ausation is lackingunder RI CO when 1 4 the ha

rm re su lts fr om t

he e xpos ur e or

dis c los ur e of

the RI CO pr e dic ate a c tiv ity . In r e Am

. 5 Ex press Co. S’holder L itig., 39 F .3d 395, 400 (2d Cir. 1994). 2 6 Plaintiffs also argue that the “ underlying pr emises” of the proxim ate c ause r equire ment 7 set forth by

the Supreme Court in Holmes v. Secur ities I nvestor Protec tion Corp., 503 U.S. at 8 269-70, support a f inding of proxi mate ca

use her e. I t is hardly

clea r that this is so; buteven 3 9 assuming a

rguendo that these policy considerations cut in plainti ffs’ f avor, the y cannot r emedy5 1 the basic de fec ts in causation discussed a bove, nor pr ovide a ba sis for over rulingour cle ar pr ior 2 prec edents. 3 F o r

th e f o r e g o i n gr e a s o n s , th e j u d g m e n to f th e d i s tr i c tc o urti s h e r e b y AF F IRM ED

. 4 5 FOR THE COURT: 6 Catherine O ’Ha g an Wolfe, Clerk 7 8 9 B Y: