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09-3212-cv 

Ideal Steel Supply 

Corp. v. Anza 

UNITED STATES COURT OF APPEALS 

FOR THE SECOND CIRCUIT 

August Term, 2009 

(Argued: June 9, 2010 Decided: June 28, 2011) 

Docket No. 09-3212-cv 

8 IDEAL STEEL SUPPLY CORPORATION, 

9 Plaintiff-Appellant, 

10 - v. 

11 JOSEPH ANZA , VINCENT ANZA and NATIONAL STEEL SUPPLY, 

12 INC . , 

13 

14 

Defendants-Appellees. 

15 Before; KEARSE, WALKER, and CABRANES, Circuit Judges. 

16 Appeal from a judgment of the United States District Court 

17 for the Southern District of New York, Richard M. Berman, Judge, 

18 dismissing, for lack of proximate cause, a civil RICO claim that 

19 plaintiff lost business as a result of defendants' investment of 

20 funds, derived from a pattern of racketeering activity, in the 

21 establishment and operation of a commercial enterprise in 

22 competition with plaintiff's business, see 18 U.S.C. §§ 1962(a), 

23 1964 Ie) 

24 Vacated and remanded . 

25 Judge Cabranes dissents, in a separate opinion. 
1 SCOTT A. MOSS, Denver, Colorado (Moss Law 

2 Practice , Denver, Colorado, on the 

3 brief) , for Plaintiff -Appellant. 

4 WILLIAM M. BRODSKY, New York, New York 

5 (JooYun Kim, Fox Horan & Camerini , New 

6 York, New York, on the brief) , for 

7 Defendants-Appellees. 

8 KEARSE, Circuit Judge: 

9 This case returns to us from the United States District 

10 Court for the Southern District of New York , Richard M. Berman, 

11 Judge, following the entry of a final judgment dismissing the 

12 third amended complaint (or "Complaint!!) of plaintiff Ideal Steel 

13 Supply Corporation ("Ideal") under the Racketeer Influenced and 

14 Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 - 1968, which 

15 principally alleged injury to Ideal ' s business by reasen of 

16 defendants ' est ablishment of a competing commercial enterprise 

17 through the investment of income derived from a pattern of 

18 racketeering activ ity- -to wit, mail fraud and wire fraud in 

19 violation of 18 U. S .C. §§ 1341 and 1343, in the filing of 

20 fraudulent tax returns and related information enabling the 

21 evasion of more than $1 million in income taxes- -in violation of 

22 18 U.S.C. § 1962{a). The district court granted defendants' 

23 motions for judgment on the pleadings, and in the alternative for 

24 summary judgment, on the grounds that the Complaint and the record 

25 were insufficient to show that any injury to Ideal's business was 

26 proximately caused by defendants' alleged violation of § 1962(a) 

27 For the reasons that follow, we vacate and remand for trial. 

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I . BACKGROUND 

Much of the factual background of this litigation ~s 

described in prior opinions, 

See Ideal Steel Supply Corp. 

familiarity with which is assumed. 

v . Anza, 254 F.Supp.2d 464, 465-66 

(S.D.N.Y. 2003) {"Ideal Steel I"l f vacated and remanded, 373 F.3d 

251, 253 - 56, 265 (2d Cir. 2004 ) (ulcleal Steel 1111), reversed in 

part . and vacated and remanded i n part, 547 U.S. 451, 453 - 56, 462 

(20 0 6) ("Ideal Steel 11111). For purposes of this appeal from the 

granting of judgment on the pleadings and summary judgment against 

10 Ideal, we take the allegations of t h e Complaint as true, and we 

11 summarize the record in the light most favorable to Ideal. 

12 A. The Parties and the Initial Claims : Ideal I and II 

13 Ideal operates a retail business in the New York City 

14 boroughs of Queens and the Bronx, selling steel mill products and 

15 related hardware and services to professional ironworkers, small 

16 steel fabricators, and do - it- yourself homeowners in the New York, 

17 New Jersey, and Connecticut area. Defendant National Steel 

18 Supply, Inc., is owned by defendants Joseph and Vincent Anza 

19 (collectively "the Anzas " ) and is Ideal's competitor . National 

20 operates two retail outlets, one in Queens and one in the Bro nx, 

21 each located a few minutes' drive from the Ideal store in that 

22 borough. Ideal and National sell substantially the same products 

23 to essentially the same customer base . 

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1 Ideal commenced the present action in 2002, principall y 

2 asserting two civil RICO claims. First, it asserted a claim 

3 against the Anzas, alleging that they had conducted, or 

4 participated in the conduct of, the affairs of an interstate -

S business enterprise through a pattern of racketeering activity , in 

6 violation of 18 U. S.C . § 1962(c) . Ideal alleged that, since at 

7 least 1998, National at its Queens store , at the direction of the 

8 Anzas, had engaged in a pattern of racketeering activity by (a) 

9 not charging sales tax to any customers who paid for their 

10 purchases in cash (the "cash-no- tax" scheme), thereby violating 

11 state laws that required merchants to charge and collect such 

12 taxes , and (b) then submitting, by mail and wire, fraudulent sales 

13 and income tax reports and returns that concealed Nationalts cash 

14 sales and misrepresented its total taxable sales, thereby evading 

15 substantial sums in income tax. Ideal alleged that by engaging in 

16 the cash-no - tax scheme through a pattern o f mail and wire frauds 

17 in violation of § 1962 ec), National injured Ideal t s business by 

18 luring away customers who chose to buy from Nationa l simply in 

19 order to save more than eight percent on their purchases by not 

20 paying the required sales tax. 

21 Second, Ideal a ll eged that in 1999 and 2000, the Anzas and 

22 National, in violation of § 1962 (a), invested funds derived from 

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National's Queens 

National's store in 

store's cash-no-tax scheme 

the Bronx . The opening of 

to establish 

that facility 

2 5 caused Ideal to lose a substantial amount of business at its Bronx 

26 store. Ideal also asserted a state-law claim for breach of an 

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1 agreement that had settled prior litigation between Ideal and 

2 National. 

3 In Ideal I I the district court dismissed Ideal's federal 

4 claims pursuant to Fed. R. eiv . P. 12 (b) (6). Citing Holmes v . 

5 Securities Investor Protection Corp. I 503 U.S. 258, 265-68 (1992) f 

6 the court noted that, in order to prevail on a civil RICO claim, 

7 the plaintiff must allege that a defendant I S RICO violation was 

8 not only a IIbut for" cause of plaintiff's injury but also its 

9 proximate cause. Citing, inter alia, Moore v. PaineWebber. Inc., 

10 189 F.3d 165, 169-70 (2d Cir. 1999) (flMoore ll ) I and Powers v. 

11 British Vita. P.L.C., 57 F.3d 176, 189 (2d Cir. 1995) (IIPowers"), 

12 the district court stated that 

13 liJ n complaints predicated on mail or wire fraud, a 

14 plaintiff must plead IIloss causation," meaning that 

15 the misrepresentation must be both an actual and a 

16 proximate source of the loss that the plaintiffs 

17 suffered, and "transaction causation," which 

18 requires a plaintiff to demonstrate that [plaintiff] '19 relied on [d] efendants ' misrepresentations, 

20 Ideal I, 254 F.Supp.2d at 468 (emphasis in original) (other 

21 internal quotation marks omitted), and that a civil RICO plaintiff 

22 claiming injury to its business from racketeering activity in the 

23 nature of fraud canhot show proximate cause without demonstrating 

24 that the plaintiff itself relied on the fraudulent communications, 

25 see id. The court concluded that 

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[a]lthough Ideal alleges that the New York State 

Department of Taxation and Finance relied on 

Defendants' alleged misrepresentations. ., Ideal 

has not alleged--indeed, can not allege - -that 

Plaintiff relied on the sales tax returns Defendants 

mailed or wired to the 

Taxation and Finance. 

claims fail. 

New York State Department of 

As a result, Ideal's RICO 

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1 Id. The court declined to exercise supplemental jurisdiction over 

2 Tdeal's breach-of-contract claim. 

3 In Ideal II, this Court vacated the Ideal I decision, 

4 noting that although there was language in Moore and Powers to the 

5 effect that a plaintiff itself must have relied on the allegedly 

6 fraudulent racketeering activity, those cases dealt with claims 

7 of plaintiffs who alleged that they were in fact parties to the 

8 transactions that they claimed had been fraudulently induced. See 

9 Ideal 11,373 F.3d at 263. Thus, the language as to the need for 

10 reliance by the plaintiff itself was descriptive rather than 

11 normative. See id. We observed that "[t] his Court has not held 

12 that the civil- RICO plaintiff who alleges mail fraud or wire fraud 

13 must have been the entity that relied on the fraud," id. 

14 Focusing principally on Ideal's claim under § 1962{c), we 

15 saw a critical distinction between that claim and the claims 

16 asserted in cases in which we had affirmed Rule 12 {bl (6) 

17 dismissals of civil RICO claims for insufficient allegation of 

18 proximate cause. Those prior cases had involved claims of injury 

19 that were too remote from the alleged racketeering activity 

20 because, for example, the plaintiff's injuries were not 

21 " 'reasonably foreseeable t II or the ", natural consequence [ 8] of the 

22 RICO violations, III Ideal II, 373 F.3d at 258 {quoting Hecht v. 

23 Commerce Clearing House, Inc., 897 F.2d 21,24 (2d Cir. 1990)); 

24 or the plaintiff was '" neither the target of the racketeering 

25 enterprise nor the competitor [] nor the customer [] of the 

26 racketeer [s] , ' " Ideal II, 373 F. 3d at 258 {quoting Sperber v. 

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1 Boesky, 849 F.2d 60, 65 (2d Cir. 1988)); or the injury sued for 

2 was neither the 11 'preconceived purpose'" nor the '''specifically3 intended consequence' It of the RICO defendants' racketeering 

4 activity, Ideal II, 373 F.3d at 259 (quoting In re American 

5 Express Co. Shareholder Litigation, 39 F.3d 395, 400 (2d Cir. 

6 1994)) . We concluded that even if an alleged scheme depended on 

7 fraudulent communications directed to and relied on by a third 

8 person rather than by the plaintiff, a plaintiff injured in its 

9 business or property has standing to pursue a civil RICO claim--

10 and adequately pleads proximate c ause --if its 

11 complaint contains allegations of facts to show that 

12 the defendant engaged in a pattern of fraudulent 

13 conduct that is wi thin the RICO definition of 

14 racketeering activity and that was intended to a nd 

15 did give the defendant a competitive advantage over 

16 the plaintiff. 

17 Ideal II, 373 F.3d at 263. Noting the allegations that 

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[t] he principal intended victim of the scheme was 

Ideal, over which defendants sought to secure a 

competitive advantage by giving certain cash 

customers an unlawful benefit, and by concealing that 

unlawful conduct and retaining the resulting profits 

by means of racketeering activity, 

24 id. at 264 (emphasis added), we concluded that 

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Ideal, as a competitor directly targeted by 

defendants for competitive injury, has standing to 

assert its RICO claims against defendants for 

violations of § 1962(c) based on the alleged 

predicate acts of mail and wire fraud, 

We concluded that Ideal's complaint adequately stated claims 

31 under both § 1962(c) and § 1962(a). 

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1 E. The Decision of the Supreme Court: Ideal III 

2 In Ideal III, 547 U.S. 451, the Supreme Court reversed in 

3 part, and vacated and remanded in part, our decision in Ideal II. 

4 With respect to Ideal's claim under § 1962(c), the Court reversed, 

5 noting its holding in Holmes "that a plaintiff may sue under 

6 § 1964 (c) only if the alleged RICO violation was the proximate 

7 cause of the plaintiff's injury," Ideal III, 547 U.S. at 453, and 

8 stating that the critical question for the present case was thus 

9 "whether the alleged violation led directly to the plaintiff's 

10 injuries, II not whether the violation intentionally targeted the 

11 plaintiff, id. at 460-61. RICO provides a civil right of action 

12 for" [a]ny person inj ured in his business or property by reason of 

13 a violation of section 1962, /I 18 U.S.C. § 1964 (c). The Holmes 

14 Court had rejected the proposition that the phrase "by reason of" 

15 required merely that the claimed violation have been a "but fori' 

16 cause of the plaintiff's inj ury, concluding instead that that 

17 phrase ,,' demand [s] . some direct relation between the injury 

18 asserted and the injurious conduct alleged.'" Ideal 111, 547 U.S. 

19 at 457 (quoting Holmes, 503 U. S. at 268). Wi th respect to a 

20 claimed violation of § 1962 (c), which prohibits conducting or 

21 participating in the conduct of an enterprise's affairs through a 

22 pattern of racketeering activity, the Court had 

23 indicated the compensable injury flowing from a 

24 violation of that provision "necessarily is the harm 

25 caused by predicate acts sufficiently related to 

26 constitute a pattern, for the essence of the 

27 violation is the commission of those acts in 

28 connection with the conduct of an enterprise." 

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1 Ideal III, 547 U.S. at 457 (quoting Sedima, S.P.R.L. v . Imrex Co., 

2 473 U.S. 479, 497 (1985) ("Sedima " )) . 

3 The Supreme Court found it clear that there was no direct 

4 relat ion between the injury asserted by Ideal and the Anzas' 

5 alleged mail and wire frauds: 

6 The RICO violation alleged by Ideal is that the Anzas 

7 conducted National's affairs through a pattern of 

8 mail fraud and wire fraud. The direct victim of this 

9 conduct was the State of New York, not Ideal. It 

10 was t he State that was being defrauded and the State 

11 that lost tax revenue as a result. 

12 The proper referent of the proximate-cause 

13 analysis is an alleged practice of conducting 

14 National's business through a pattern of defrauding 

15 the State. To be sure, Ideal asserts it suffered its 

16 own harms when the Anzas failed to charge customers 

17 for the applicable sales tax. The cause of Ideal's 

18 asserted harms, however, is a set. of actions 

19 (offering lower prices) entirely distinct from the 

20 alleged RICO violation (defrauding the State) 

21 Ideal III, 547 U.S . at 458 (emphases added) 

22 The Court noted that one of the reasons for the 

23 directness requirement is that'" l tlhe less direct an injury ~s, 

24 the more difficult it becomes to ascertain the amount of a 

2S plaintiff's damages attributable to the violation, as distinct 

26 from other, independent, factors . '" Id. at 458 (quoting Holmes, 

27 503 U.S. at 269). It found Ideal's § 1962(c) claim 

28 "illustrative": 

2 9 The inj ury Ideal alleges is its own loss of sales 

30 resulting from National's decreased prices for cash31 paying customers . National, however, could have 

32 lowered its prices for any number of reasons 

33 unconnected to the asserted pa t tern of fraud. It 

34 may have received a cash inflow from some other 

35 source or concluded that the additional sales would 

36 'justify a smal ler profit margin. Its lowering of 

37 prices in no sense required it to defraud the state 

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tax authority. Likewise, the fact that a company 

commits tax fraud does not mean the company will 

lower its prices; the addi tional cash could go 

anywhere from asset acquisition to research and 

development to dividend payouts. 

6 Ideal III, 547 U.S. at 458 - 59. The Court also noted that 

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Ideal's lost- sales could have resulted from factors 

other than petitioners' alleged acts of fraud. 

Businesses lose and gain customers for many reasons, 

and it would require a complex assessment to 

establish what portion of Ideal 's lost sales were the 

product of National's decreased prices. 

Id. at 459. The Court envisioned proceedings that could only be 

"speculative, II id., if Ideal were permitted to pursue its 

15 § 1962(c) claim: 

16 A court considering the claim would need to begin by 

17 calculating the portion of National's price drop 

18 attributable to the alleged pattern of racketeering 

19 activity. It next would have to calculate the 

20 portion of Ideal r s lost sales attributable to the 

21 relevant part of the price drop. The element of 

22 proximate causation recognized in Holmes is meant to 

23 prevent these types of intricate, uncertain 

24 inquiries from overrunning RICO litigation . 

25 Ideal III, 547 U.S. at 459 - 60. Accordingly, the Supreme Court 

26 reversed Ideal II to the extent that Ideal II had overturned the 

27 district court ' s dismissal of Ideal's claim under § 1962(c). 

28 With respect to Ideal's claim under § 1962(a), however, 

29 the Supreme Court vacated and remanded for fUrther consideration. 

30 Because Ideal II had focused principally on Ideal's § 1962(c) 

31 claim, wi thout addressing the issue of proximate cause in 

32 connection with the claim under § 1962(a), and because the parties 

33 had devoted nearly all of their attention in the Supreme Cou rt to 

34 the § 1962 (c) claim, the Ideal III Court declined to resolve the 

35 viability of Ideal's § 1962 (a) claim. The Court remanded for 

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1 further considerati on of the proximate-cause issue in light of the 

2 differences between the two subsections: 

3 [i] t is true that private actions for violations of 

4 § 1962 (a), like actions for violations of § 1962 (c), 

5 must be asserted under § 1964 (c) . It likewise is 

6 true that a claim is cognizable under § 1964(c) only 

7 if the defendant's alleged violation proximately 

8 caused the plaintiff's injury. The proximate-cause 

9 inquiry, however, requires careful consideration of 

10 the II relat ion between the inj ury asserted and the 

11 injurious conduct alleged. tI Holmes, supra, at 268. 

12 Because § 1962 (c) and § 1962 (a) set forth distinct 

13 prohibitions, it is at least debatable whether 

14 Ideal's two claims should be analyzed in an 

15 identical fashion for proximate-cause purposes. 

16 Ideal III, 547 U.S. at 461 - 62 (emphasis added). 

17 C. The Decision of the District Court on the Subsection (a) Claim 

18 on Remand : Ideal IV 

19 This Court remanded the matter to the district court for 

20 consideration, in light of Ideal III, of the issue of proximate 

21 cause with respect to Ideal I s claim under § 1962 (a) Following 

22 our remand , Ideal filed its present Complaint, reasserting only 

23 its § 1962 (a) claim and its state-law breach - oE - contract claim, 

24 and additional discovery was conducted. 

25 The Complaint again described the cash-no-tax scheme 

26 conducted at National's Queens facility l.n the late 19909 and 

27 early 20009 , and the attendant mail and wire frauds t hat allowed 

28 defendants to retain unreported profits and avoid paying proper 

29 taxes. It alleged that defendants used the concealed unlawful 

30 profits and tax savings to finance the opening of the National 

31 store in the Bronx to compete with Ideal. According to the 

32 Complaint and materials developed in discovery, for 1999 and 2000 

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1 National filed tax returns reporting total income of $145,118. 

2 Following the commencement of the present lawsuit, however, 

3 National filed amended tax returns showing that its total income 

4 f or those years had instead been nearly $1.7 million, and that for 

5 the pe r iod 1998-2003 National had underreported its taxable income 

6 by a total of $4.3 million, allowing it to underpay its taxes by 

7 approximately $1.7 million . Discovery and other proceedings 

8 revealed that the Anzas had created a corporation called Easton 

9 Development Corporation ( " Easton Corporation" ) to purchase 

10 property in 1999 co enable National to open its store in the 

11 Bronx, and that the cash portion of the purchase price was 

12 $500, 000, which was paid by National . {See Depositi on of Joseph 

13 Anza at 34; Declaration of Vincent Anza dated December 12, 2008 

14 ("Anza Decl."), ~~ 10, 11; Deposition of Vincent Anza ( "An za 

15 Dep.") at 188.) National began operating its Bronx store in 2000. 

16 (See Anza Decl. ~ 4.) Defendants stated that "National expended 

1 7 approximately $850,000 to open its Bronx facilit y" (id. ~ 5); a 

1 8 report prepared by accountants retained by Ideal concluded that 

19 National had spent considerably more. 

20 I deal asserted that prior to 2000 there were no companies 

21 capable--in e i t her s ize or breadth of offerings--of competing with 

22 Idea l in the Bronx, and that in 1998 -2000 , Ideal consistently had 

23 annual sales in the range of $4 million $4.6 million. It 

24 alleged that defendants ' opening of the National store in the 

25 Bronx injured Ideal in two ways. First, simply by being there and 

26 offering products and services comparable to those offered by 

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1 Ideal, the new National store took customers from Ideal, causing 

2 Ideal's annual sales in 2001-2002 to drop by about one-third, to 

3 $2.7 million - $2.9 million. Second, Ideal asserts that at the 

4 Bronx store National engaged in the same cash- no - tax scheme that 

5 it conducted in the Queens store, thus allowing National to lure 

6 customers with the lower prices financed by the prior tax frauds. 

7 Defendants moved for judgment on the pleadings pursuant to 

8 Fed. R. Civ. P. 12 (c), or alternatively for summary judgment 

9 pursuant to Fed. R. Civ. P . 56 , dismissing the Complaint on the 

10 ground that Ideal could not show that its lost sales were 

11 proximately caused by the mere creation of National ' s Bronx 

12 facility through the alleged investment of the proceeds of 

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racketeering activity. In Ideal Steel Supply Corp. v. Anza, No. 

02 Civ. 4788, 2009 i'lL 1883272 IS.D.N.Y. June 30, 2009) 

( "Ideal IV"), the district court found defendants' position 

persuasive, and it granted judgment on the pleadings and, 

17 alternatively, summary judgment. 

18 First I the court found that Ideal's Complaint failed to 

19 meet the standard set by Bell Atlantic Corp. v. Twombly, 550 U.S. 

20 S-44 (2007) (IiTwombly " ), which requires a plaintiff to plead II 'more 

21 than labels and conclusions, and a formulaic recitation of the 

22 elements of a cause of action, 1" Ideal IV, 2009 WL 1883272, at *3 

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(quot_ing Twombly, 550 U. S. 

that "[d] efendants argue 

plead facts showing that 

at 555). 

persuasively 

Ideal ' s lost 

The district court found 

that Plaintiff fails to 

sales were proximately 

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1 the alleged investment of an unspecified amount of RICO proceeds." 

2 Ideal IV, 2009 WL 1883272, at *4 (internal quotation marks 

3 omitted). It also found the Complaint 

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deficient in that it does not alleqe facts 

explaining how Defendants' investment of purported 

racketeering income to establish and operate its 

Bronx business location proximately caused Ideal to 

lose sales. profits, and market share. 

Plaintiff's allegations that "Defendants 

substantially decreased Ideal's sales. orofi ts, and 

local market share. and eliminated Ideal ' s dominant 

market position. by using racketeering proceeds to 

acquire. establish, and operate their Bronx business 

operation, " are little more than "labels and 

conclusions," Twombly, 550 U.S. at 555, and do not 

show how Defendants [,] "alleged violation [of RICO] 

led directly to [Ideal ' s] injuries," [Ideal] III, 547 

U.S. at 461. They are insufficient to state a claim 

under Section 1962(a). 

20 Ideal IV, 2009 WL 1883272, at *4 (emphases added) . 

21 In t he alternative, the district court granted defendants' 

22 motion for summary judgment. The court noted that the Supreme 

23 Court in Ideal III had found that proximate cause was lacking with 

24 respect to Ideal's 1962 (c) claim because n. it would require a 

25 compl ex assessment to establish what portion of Ideal's lost sales 

26 were the product of National's [conduct]' because [b] usinesses 

27 lose and gain customers for many reasons,' II Ideal IV, 2009 WL 

28 1883272 , at *6 (quoting Ideal III , 547 U.S. at 459). The district 

29 court stated that "[tl his is no less true here II with respect to 

30 the 1962(a) claim . Ideal IV, 2009 WL 1883272, at *6. 

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Plaintiff's Section 1962(a) RICO claim raises the 

same concerns in view of Plaintiff's assertions that 

its injuries include "a permanent loss of sales, 

profits, and market share. II • That is, it would 

be purely speculative for this Court to 

conclude that Ideal's alleged injuries resulted from 

Defendants' conduct as opposed to other factors 

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1 liThe element of proximate causation . is 

2 meant to prevent these types of intricate, uncertain 

3 inquiries from overrunning RICO litigation. II [Ideal I 

4 III, 547 U.S. at 460 . 

5 Ideal IV, 2009 WL 1883272, at * 6. 

6 The court found that proximate cause was lacking because 

7 "there were intervening factors that may have caused Ideal's 

8 alleged lost sales, profits, and diminution in market share. II Id. 

9 at *5. 

10 For one thing, Ideal's principal, Giacomo Brancato, 

11 testified that Ideal's Bronx location had "thousands 

12 of customers that buy thousands of products for many 

13 different uses. II The decisions of individual 

14 purchasers, i.e., in this case presumably not to buy 

15 steel products from Ideal, have been held to 

16 constitute an independent intervening act between the 

17 alleged RICO violations and the alleged injuries . 

18 Id. (emphases added). The court also found that "Ideal's Bronx 

19 operation had several competitors, " id. at *5 n.2, that Ideal 

20 II recei ved and acceptedll inferior products, id. at * 6, and that 

21 Ideal made various business decisions such as deciding whether or 

22 not to lower its prices to match those of National, see id., all 

23 of which the court held constituted intervening factors preventing 

24 Ideal from establishing proximate cause. 

25 Accordingly, the district court dismissed Ideal's claim 

26 under § 1962 (a). The court also declined to exercise supplemental 

27 jurisdiction over Ideal's state-law contract claim and dismissed 

28 that claim without prejudice. See id. at *7 . 

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1 II. DISCUSSION 

2 On appeal, Ideal contends principally that the district 

J court failed to take proper account of the different acts 

4 prohibited by § 1962(a ) and § 1962 (c) and thereby erred in 

5 concluding that Ideal could not show that defendants ' use or 

6 investment of the proceeds from their mail and wire frauds to 

7 establish their Bronx facility was the proximate cause of the 

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alleged injury to Ideal's business. It also contends, inter alia, 

that the court conElated proximate causation with actual 

causation, mis characterized as conclusory certain of the 

11 Complaint I s allegat ions that were factual, disregarded evidence 

12 produced in discovery that supported Ideal 's § 1962(a) claim, and 

13 viewed disputed evidence in a light favoring the defendants. 

14 Defendants contend principally that the district court's view that 

15 the proximate cause inquiry with respect to Ideal ' s claim under 

16 subsection (a) was the same as that with respect to subsection (c) 

17 was correct because Ideal failed to plead injury on a use-or18 investment theory that was distinct from the injury that it 

19 alleged resulted from the racketeering activity itself, and that 

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the district court correctly concluded that any injury to Ideal 

was too remote to have been proximately causeq by the open~ng of 

National's Bronx facility. In addition, defendants contend that 

Ideal failed to show that National invested RICO proceeds in its 

Bronx location and that, in any event, the § 1962 (a) prohibition 

against the use or investment of racketeering activi ty proceeds 

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1 does not apply when those proceeds are used or reinvested in the 

2 same entity that engaged in the racketeering activity. 

3 We conclude that to the extent that Ideal claims injury 

4 f rom National's continuation in its Bronx store of the cash-no-tax 

5 s cheme conducted in the Queens store, that claim appears to be 

6 conceptually indistinguishable from the § 1962 (c) claim rejected 

7 by the Supreme Court in Ideal III . The lower prices afforded to 

8 National's customers through this scheme do not involve the 

9 "investment" or "use" of the illegally derived funds. 

10 To the extent, however, that Ideal claims that it lost 

11 sales to National because defendants invested the proceeds of 

12 the ir pattern of racketeering activity to establish and operate 

13 National's new store in the Bronx, we reject defendants' 

14 content.ions and concl ude, for the reasons that follow, that the 

15 district court erred in granting judgment on the pleadings on the 

16 basis of Twombl y, and erred in granting summary judgment. 

17 A. The Scope of Section 1962(a) 

18 In enacting RICO, Congress was concerned about, inter 

19 alia, damage to the nation's free enterprise system by persons or 

20 entities infiltrating or operating otherwise legitimate 

21 businesses by means of criminal activities. The statement of 

22 findings and purpose that prefaces the Organized Crime Control Act 

23 of 1970 ( "OeCA"), of which RICO was Title IX, states, inter alia, 

24 that 

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organized 

weaken the 

crime activities in the United States 

stability of the Nation's economic system, 

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harm innocent investors and competing organizations, 

interfere with free competition, seriously burden 

interstate and foreign commerce, threaten the 

domestic security, and undermine the general welfare 

of the Nation and its citizens. 

Puh.L. 91 452, 84 Stat. 922-23 (1970) (emphasis added). RICO 

7 provisions such as § 1962 (al reflect Congress ' s concern about the 

8 control of otherwise legitimate business concerns "acquired by the 

9 sub rosa investment of profits acquired from illegal ventures, II 

10 S. Rep. No . 91-617, at 77 (1969); see id. (infiltration of 

11 organized crime into legitimate businesses portends the 

12 Il e ffective (J eliminat [ion]" of "[c] ompetitors") . 

13 When organized crime infiltrates a legitimate 

14 business, its whole method of operation counters our 

15 theories of free competition and acts as an illegal 

16 restraint of trade. Whether a business is purchased 

17 from funds derived from its many unlawful activities, 

1 8 or whether it is acquired by extortion and violence, 

19 its aim is monopoly. The vast economic power 

20 concentrated in this giant criminal conglomerate 

21 constitutes a dire threat to the proper functioning 

22 of our economic system. 

23 116 Congo Rec. 602 (1970) (statement of Sen. Hruska). See also 

24 s. Rep. No. 91-617, at 78 ("The syndicate-owned business, 

25 financed by illegal revenues and operated outside the rules of 

26 fair competition of the American marketplace, cannot be tolerated 

27 i n a system of free enterprise." (internal quotation marks 

28 omitted)); id . at 81 (describing civil remedies intended to 

29 attack, inter alia, "corruption in the acquisition or operation of 

30 business") _ 

31 The prohibitions set out in RICO are not. limited to the 

32 activities of organized crime but rather extend to any person or 

33 entity engaging in a "pattern of racketeering activity" as that 

18 
1 term is defined in 18 U. S.C. § 1961 (5). See, ~, H.J, Inc. v . 

2 Northwestern Bell Telephone Co., 492 U.S. 229, 238, 249 (1989). 

3 "To be sure, Congress focused on , and the examples used ~n the 

4 debates and reports to illustrate the Act's operation concern, the 

5 predations of mobsters. Organized crime was without a doubt 

6 Congress' major target " rd. at 245. But "the capacious 

7 language" Congress used in defining such terms as pattern of 

8 racketeering activity is not limited to conduct by entities 

9 having a nexus with organized crime, and ttthe legislative history 

10 shows that Congress knew what it was doing when it adopted 

11 commodious language capable of extending beyond organized crime. II 

12 rd. at 246; see, !L:...9....:... id. at 247 {'"organized crime' simply 'a 

13 shorthand method of referring to a large and varying group of 

14 individual criminal offenses committed in diverse circumstances,' 

15 not a precise concept" (quoting 116 Congo Rec. 35344 (1970) 

16 (statement of Rep. Poff))) 

17 Among its civil remedies, RICO provides a private right of 

18 action for treble damages for a "person injured in his business or 

19 property by reason of a violation of section 1962. II 18 U.S.C. 

20 § 1964 (e) . Subsection (a) of § 1962--the remaining federal - law 

21 focus of the present litigation- -provides, in pertinent part, that 

22 [i] t shall be unlawful for any person who has 

23 received any income derived, directly or indirectly, 

24 from a pattern of racketeering activity . to use 

25 or invest, directly or indirectly, any part of such 

26 income, or the proceeds of such income, in. . the 

27 establishment or operation of, any enterprise which 

28 is engaged in, or the activities of which affect, 

29 interstate or foreign commerce. 

- 19 -
1 

2 

18 U.S.C . § 1962(a) (empha ses added) 

to "include[] any individual, 

RICO defines "enterprise" 

partnership, corporation, 

3 association, or other legal entity, and any union or group of 

4 individuals associated in fact although not a legal entity." Id. 

S § 1961 (4) . For the sake of brevity, we wi.!l refer to an 

6 "enterprise which is engaged in, or the activities of which 

7 affect, interstate or foreign commerce," id. § 1962 (a), as a 

8 "commerce - affecting enterprise. II 

9 Subsection (c) of § 1962, whi ch was the principal focus of 

10 Ideal I, II, and III, makes i t unlawful for any person employed by 

11 or associated with a commerce-affecting enterprise " to conduct or 

12 participate, directly or indirectly, in the conduct of such 

13 enterprise's aff airs through a pattern of racketeering activity." 

14 18 U.S . C. § 1962(c) Thus, " the compensable injury flowing from a 

15 violation of that provision 'necessarily is the harm caused by 

16 predicate acts sufficiently related to constitute a pattern.'" 

17 Ideal III, 547 U.S. at 457 (quoting Sedima , 473 U.S. at 497) 

18 (emphasis ours) . 

19 Subsection (a), in contrast, focuses the inquiry on 

20 conduct different from the conduct constituting the pattern of 

21 racketeering activity. After there have been sufficient predicate 

22 acts to constitute such a pattern, what is forbidden by subsection 

23 (a) is the investment or use of the proceeds of that activity to 

24 establish or operate a commerce-affecting enterprise. Thus, the 

25 plaintiff asserting a civil RICO claim based on a violation of 

26 subsection (a) must show injury caused not by the pa ttern of 

- 20 -
1 racketeering activity itself, but rather by the use or investment 

2 of the proceeds of that activity, see, , Ouaknine v. 

3 MacFarlane, 897 F.2d 75, 82-83 (2d eir. 1990). 

4 Further, the numerous disjuncts in § 1962(a) create a 

5 broad prohibi tion. Assuming a pattern of racketeering activity 

6 and a commerce-affecting enterprise, both the funds derived 

7 "directly or indirectly It from such activity and the "proceeds of 

8 such income" are tainted: no part of the "income, or the proceeds 

9 of such income" may lawfully be "use [d] or invest red] ,II whether 

10 "directly or indirectly, Il in "the establishment or operation" of 

11 that enterprise. Thus, although the injury alleged to result from 

12 the violation of subsection (a) --as from the violation of any 

13 other subsection of § 1962--must be sufficiently directly related 

14 to the violation to meet the legal standard of proximate cause 

15 implied in § 1964 (c), the many disjuncts in § 1962 (al mean that 

16 any of dozens of combinations or permutations will constitute a 

17 violation of that sec.tion. And 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

RICO is to be read broadly. This is the lesson not 

onl y of Congress ' self-consciously expansive language 

and overall approach, see United States v. Turkette, 

452 U.S. 576, 586-587 (198 1 ), but also of its express 

admonition that RICO is to "be liberally construed to 

effectuate its remedial purposes," Pub.L. 91-452, 

§ 904 (a), 84 Stat. 947 . The statute's " remedial 

purposes" are nowhere more evident than in the 

orovision of a private action for those injured by 

racketeering activity . 

28 Sedima, 473 U.S. at 497 - 98 (emphases added); see id. at 491 n_l0 

29 (" [I] f Congress ' liberal-construction mandate is to be applied 

30 anywhere, it is in § 1964, where RICO's remedial purposes are most 

3 1 evident.") 

- 21 -
1 Given the breadth with which RICO is to be interpreted, we 

2 reject for two reasons defendants ' contention that § 1962 (a) ' s 

3 prohibition against the use or investment of racketeering activity 

4 proceeds is inapplicable to their alleged use of pattern-ofS racketeering-activity proceeds to open National's Bronx facility 

6 on the theory that that section does not apply when such proceeds 

7 are simply used or reinvested in the same entity that engaged in 

8 the racketeering activity. First, defendants' factual premise is 

9 flawedi they did not merely reinvest in the same entity. Rather, 

10 the Anzas created a new company, Easton Corporation, to purchase 

11 the Bronx property for the new National store. Second, even if 

12 Congress did not intend subsection (a) ' s prohibition to reach the 

13 use of RICO tainted funds by the RICO violator in its own ongoing 

14 operation, the legislative history does not permit the inference 

15 that Congress meant to allow such entities, with impunity, to use 

16 those funds to branch out to new locations. 

17 Finally, in keeping with the proper recognition of RICO's 

18 breadth, we note that "income" as used in § 1962{a) was doubtless 

19 not intended by Congress to be interpreted restrictively to 

20 exclude moneys unlawfully retained by means of racketeering 

21 activity. In describing the RICO sections of the bill that became 

22 the OeCA, the report of the Judiciary Committee of the House of 

23 Representatives stated that" (s]ubsection (a) makes it unlawful to 

24 invest funds derived from a pattern of racketeering activity, as 

25 defined in section 1961(1)," H.R. Rep. No. 91-1549, at 57, 

26 reprinted in 1970 U.S . Code Congo & Admin. News 4007, 4036 

- 22 -
1 

2 

3 

(emphasis added). We can discern no meaningful distinction, for 

RICO purposes, between income fraudulently acquired and income 

fraudulently retained; both result in funds not otherwise 

4 available but for the fraud. Thus we view moneys unlawfully saved 

5 or withheld by means of a pattern of mail and wire frauds, as is 

6 alleged In the present case, as falling within the meaning of 

7 § 1962 (a) 's reference to "income. II Nor have defendants urged a 

8 narrower interpretation. 

9 In sum, with respect to Ideal ' s claim under § 1 962 (c) I 

10 I, [tj he proper referent of the proximate-cause analysis [was the] 

11 alleged practice of conducting National ' s business through a 

12 pattern of ll mail and wire fraud in connection with its tax 

13 obligations, '!defrauding the State." Ideal III, 547 U.S, at 458. 

14 Given this frame of reference, Ideal's injury, i.e., loss of sales 

15 to National, was "attenuated," id. at 459, because the direct 

16 victim of that activity was the state of New York . But 

17 It [p]roximate cause requires only 'some direct relation between the 

18 injury asserted and the injurious conduct alleged,' and excludes 

19 only those ' link [s] that are too remote, purely contingent, or 

20 indirect. II! Staub v. Proctor Hospital, 131 S. Ct . 1186, 1192 

21 (2011) (quoti ng Hemi Group, LLC v. Cit y of New York, 130 S. Ct. 

22 983,989 (2010) ( "Hemin)). With respect to the claim under 

23 § 1962 (a), the proper referent in the proximate-cause ana"lysis is 

24 defendants ' Ituse or invest [ment] It of the funds , derived directly 

25 or indirectly from the alleged pattern of racketeering activity, 

26 to establish or operate the National facility in the Bronx. 

- 23 -
1 With these principles in mind, we turn to the matter of 

2 whether Ideal 1 s Complaint was properly dismissed on the ground 

3 that it failed to plead, or that Ideal failed to adduce evidence, 

4 that. defendants' investment or use of funds derived from the 

5 pattern of mail and wire frauds was a proxi mate cause of Idealts 

6 alleged injury at its Bronx store. 

7 B. The Dismissal Pu r suant to Rule 12(c} 

8 As indicated in Part I.C. above, the district court 

9 dismissed the Complaint pursuant to Rule 12(c) on the grounds that 

10 it did not specify the amount of RICO proceeds used to create 

11 National's Bronx facility , Ideal IV, 2009 WL 1883272, at * 4, and 

12 lid [id] not allege facts expl aining how Defendants I investment of 

13 purported racketeering income to establish and operate its Bronx 

14 business location proximately caused Ideal to lose sales, profits, 

15 and market share, 11 id. i and that Ideal's "allegations that 

16 Defendants substantially decreased Ideal's sales, profits, and 

17 local market share, and eliminated Ideal's dominant market 

18 position, by using racketeering proceeds to acquire, establish, 

19 and operate their Bronx business operation, [we] re little 

20 more than 'labels and conclusi ons,' II id. (quoting Twombl y, 550 

21 U, S. at 555 (other internal quotation marks omitted)), or "'a 

22 formulaic recitation of the elements of a cause of action, ' It id. 

23 at *3 (quoting Twombly, 550 U.S. at 555). We disagree with the 

24 district court's characterizations and its application of Twombly. 

- 24 -
1 First, the Twombly Court noted that Fed. R. Civ . P. 

2 8 (a) (2) "requires only 'a short and plain statement of the claim 

3 showing that the pleader is entitled to relief. in order to give 

4 the defendant fair notice of what the claim is and the 

5 grounds upon which it rests, II Twombly, 550 U. S. at 555 (other 

6 internal quotation marks omitted) i see also Swierkiewicz v. Sorema 

7 N.A., 534 U.S. 506, 508, 512 (2002) (to satisfy Rule 8(a)(2), a 

8 plaintiff who alleges facts that provide fair notice of his claim 

9 need not also allege uspecific facts establishing a prima facie 

10 case") . The Twombly Court, while stating that mere 1I1abels and 

11 conclusions" or uformulaic recitation [8] of the elements of a 

12 cause of action will not do, II stated that "a complaint attacked by 

13 a Rule 1 2 (b) (6) motion to dismiss does not need detailed factual 

14 allegations, II but only" [f]actual allegations (that are] enough 

15 to raise a right to relief above the speculative level," 550 U.S. 

16 at 555, i. e., enough to make the claim Tl plausible, II id. at 570 i 

17 see Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) ("A claim has 

18 facial plausibility when the plaintiff pleads factual content that 

19 allows the court to draw the reasonable inference that the 

20 

21 

defendant is liable for the misconduct alleged. U) 

Court stated that II [a] sking for plausible grounds 

The Twombly 

does not 

22 impose a probability requirement at the pleading stage; it simply 

23 calls for enough fact to raise a reasonable expectation that 

24 discovery will reveal evidence of illegal[ityJ.n 550 U. S . at 556. 

25 The district court in Ideal IV demanded of Ideal a 

26 pleading at a level of specificity that was not justified by 

- 25 -
1 Twombly. The Complaint's lIallegations that Defendants 

2 substantially decreased Ideal ' s sales, profits, and local market 

3 share, and eliminated Ideal ' s dominant market position, by using 

4 racketee r ing proceeds to acquire, establish, and operate their 

5 Bronx business operation, n Ideal IV, 2009 WL 1883272, at * 4 

6 (internal quotation marks omitted), were not properly 

7 characterized as "labels," id. , nor could the allegations--as they 

8 were set forth in the Compla i nt- -be considered a mere formulaic 

9 repetition of the statutory language or considered so conclusory 

10 as to lack facial plausibility. The Complaint alleged, inter 

11 alia, that the income of National, as a Subchapter S corporation 

12 under the Internal Revenue Code, passed through to the An z as as 

13 its sole shareholders ~ Complaint ~ 26); that from at least 

14 1996 to the spring of 2004, National and the AnZdS filed 

15 fraudulent tax returns understating the amount of their taxable 

16 income and enabling them to save and amass substantial funds (see, 

17 fL:...9....:.., id. ~~ 28 , 30, 61); that after the commencement of this 

18 lawsuit in 2002, defendants admitted the falsity of those income 

19 tax returns by filing amended returns showing that they had 

20 falsely underreported National's income to tax authorities for 

21 several years (~ id. ~ 29) ; that defendants I false tax returns 

22 from 1996 to spring 2004 were f i led by mail and fax, violated 

23 federal laws against mail and wire fraud, and constituted a 

24 pattern of racketeering activity in violation of RICO (see id. -- --

25 1t 34-35 , 45, 61) i that for each of the years 1999 and 2000, 

26 defendants reported taxable income of less than $100,000 (see id. -- --

- 26 -
1 ~ 38); that the purchase and renovation expenses for National's 

2 Bronx facility were capital expenses that could not be funded with 

3 pre-tax dollars (~ id. 11 39) i that the expense of purchasing, 

4 renovating, equipping, stocking, and opening National's Bronx 

5 facility was estimated by Ideal to be in excess of $1 million (see 

6 id. 11 37) i and that in 1999-2000 I defendants fraudulently 

7 underreported their income by more than $1 million (see id. ~ 40). 

8 The Complaint all eged that before National opened its Bronx 

9 facility, Ideal had a dominant market position there, with no 

10 serious competitors, as no other Bronx vendors offered as 

11 comprehensi ve an array of goods and services as Ideal (see id . 

12 ~ 11); that National's Bronx facility, opened in the summer of 

13 2000 a mere eight minutes' drive from Ideal 1 s facility, began to 

14 offer an array of goods and services similar to those offered by 

15 Ideal (see id. ~~ 9-15); a nd that the opening of National's Bronx 

16 facility caused a substantial decrease in Ideal ' s sales, profits, 

17 and local market share (see id. ~ 43) . We see nothing implausible 

18 in the allegations that a plaintiff business entity that had once 

19 

20 

21 

enjoyed a dominant market position, 

from other, more limited, entities, 

competitor comparable in size and 

with no serious competition 

lost business when a large 

offerings to the plaintiff 

22 opened nearby. 

23 

24 Rule 

Second, 

12 (c) are 

although the standards for dismissal pursuant to 

the same as for a dismissal pursuant to Rule 

25 12 (b) (6), gg, , Rivera v. Heyman, 157 F.3d 101, 103 (2d Cir. 

26 1998), and the standard set by Twombl y for evaluation of the 

- 27 -
1 viability of the pleading is the same under each Rule, see, ~, 

2 Hayden v. paterson, 594 F.3d 150, 160-61 (2d eir. 2010), we view 

3 the district courtls focus solely on the allegations of the 

4 Complaint, given the posture of this case, as a misapplication of 

5 Twombly. Twombly is meant to allow the parties and the court to 

6 avoid the expense of discovery and other pretrial motion practice 

7 when the complaint states no plausible claim on which relief can 

8 be granted: 

9 [W]hen the allegations in a complaint, however true, 

10 could not raise a claim of entitlement to relief, 

11 this basic deficiency should. . be exposed at the 

12 point of minimum expenditure of time and money by the 

13 parties and the court. 

14 Twombly, 550 U. S. at 558 (internal quotation marks omitted) 

15 (emphasis ours) . In the present case, the point of minimum 

16 expense had long since been passed. The case had been addressed 

17 at each of the three levels of the federal judicial system; and, 

18 by the time of Ideal IV, discovery had been completed. To be 

19 sure, whether the complaint states a claim upon which relief can 

20 be granted is a question of law, and that question may be raised 

21 even as late as at the trial of the action, .§.§.§. Fed. R. eiv . P. 

22 12 (hi (2 I But pleadings often may be amended. Prior to trial, 

23 after the time to a,mend as of right has passed, ,,[t] he court 

24 should freely give leave [to amend1 when justice so requires, II 

25 Fed . R. eiv . P. 15(a) (2) ; ~, ~, Rachman Bag Co . v. Liberty 

26 Mutual Insurance Co., 46 F.3d 230, 234-35 (2d eir. 1995); see also 

27 Fed. R. Civ. P. 15{b) (1) (even at trial, "{t]he court should 

28 freely permit an amendment tl to conform the pleadings to the proof, 

- 28 -
1 unless the objecting party can show prejudice). Indeed, the 

2 availability of "amendment of pleadings II was one of the reasons 

3 for Congress's expectation that the private right of action for 

4 RICO violations would be an effective tool . S. Rep. No. 91-617, 

5 at 82. 

6 In light of the fact that discovery in this case had been 

7 completed prior to the decision in Ideal IV , we do not regard 

8 Twombly as requiring that defendants' Rule 12(c) motion be granted 

9 if evidence that had already been produced during discovery would 

10 fill the perceived gaps in the Complaint. For example, although 

11 the district court found persuasive the defendants ' argument that 

12 the Complaint did not specify how much RICO income was invested to 

13 create the National facility in the Bronx, materials in the record 

14 showed that the purchase price of the property was $2.5 million; 

15 that of that sum, $500,000 in cash was paid at the closing, and 

16 that that $500,000 was provided by National (~, ~, Anza Dep. 

17 at 186-87, 435); that defendants admit that opening the Bronx 

18 store cost at least $850,000 (~, ~, Anza Decl. , 5) i and that 

19 Ideal's expert accountant estimated that the total cost exceeded 

20 $1 million. To the extent that the district court viewed as 

21 conclusory the Complaint I s allegations that defendants had f iled 

22 income tax returns that substantially understated their taxable 

23 income, the court should have taken into account the tax returns 

24 in the record- -both those that were originally filed by National 

25 showing less than $73,000 in taxable income for each of the years 

26 1999 and 2000, and the amended returns showing taxable income for 

- 29 -
1 those two years totaling nearly $1.7 million, as well as the 

2 deposition testimony of an accountant for National that those and 

3 other amended returns filed for National showed that for 1998 - 2003 

4 National had unreported income totaling approximately $4.3 million 

5 (~ Deposition of Jay L. Of sink at 40). And to the extent that 

6 the court viewed the Complaint's allegation that Ideal's Bronx 

7 operation lost sales after the advent of National as conclusory, 

8 it should have taken into consideration, inter alia, the 

9 deposition testimony of Ideal'S sole shareholder, Giacomo 

10 Brancato, who stated that in each of the years 1998, 1999, and 

11 2000, Ideal had sales in the range of $4 million ~ $4.6 million 

12 {Deposition of Giacomo Brancato {"Brancato Dep. "} at 282}; and 

13 that after National opened its Bronx facility in the summer of 

14 2000, Ideal! s sales in 2001 and 2002 dropped by about one-third, 

15 to $2.7 million - $2,9 million {~id,}, The record also permits 

16 the inference that the sales lost by Ideal were made by National. 

17 National! s tax returns for 2001 and 2002 showed that its gross 

18 sales for those years, the first two full years of its Bronx 

19 facility's operation, were, respectively, some $1.2 million and 

20 $2.3 million more than its gross sales during the last year before 

21 the Bronx facility was opened. Although the returns do not 

22 provide figures for National's Queens and Bronx facilities 

23 separately, it is surely inferable that at least a substantial 

24 portion of its 24-47% increase in sales was attributable to the 

25 Bronx facility, 

- 30 -
1 In these circumstances, assuming the truth of the 

2 Complaint's allegations and of evidence in the record supporting 

3 those allegations, if defendants' investment of the proceeds of 

4 their alleged pattern of mail and wire frauds has not 

5 sufficiently directly harmed Ideal to meet the standard of 

6 proximate cause, we find it difficult to envision anyone who could 

7 show injury proximately caused by that investment--or to fathom to 

8 whom Congress meant to grant a private right of action under 

9 subsection (a) _ We conclude that the district court erred in 

10 dismissing Ideal's Complaint pursuant to Rule 12{c). 

11 

12 

13 

C. Summary Judgment 

The principles governing 

established. Such a motion "may 

summary judgment are well 

properly be granted- - and the 

14 grant of summary judgment may properly be affirmed--only where 

15 there is no genuine issue of material fact to be tried, and the 

16 facts as to which there is no such issue warrant the entry of 

17 judgment for the moving party as a matter of law. II Kay tor v . 

18 Electric Boat Corp., 609 F.3d 537, 545 (2d Cir. 2010); ~ Fed. R. 

19 Civ. P . 56 (a) . In reviewing the evidence to determine whether the 

20 movant is entitled to judgment as a matter of law, the court "may 

21 not make credibility determinations or weigh the evidence" and 

22 "must draw all reasonable inferences in favor of the nonmoving 

23 party." Reeves v. Sanderson Plumbing Products, Inc., 530 U.S . 

24 133, 150 (2000) (emphasis added). The function of the district 

25 court in considering the motion for summary judgment is not to 

- 31 -
1 resolve disputed questions of fact but only to determine whether, 

2 as to any material issue, a genuine factual dispute exists. See, 

3 ~, Anderson v. Liberty Lobby, Inc., 477 U.S . 242, 249-50 

4 (1986) 

5 Applying these principles, we first reject defendants' 

6 contention--which the district court did not adopt--that they are 

7 entitled to summary judgment on the ground that Ideal failed to 

8 prove that they invested funds derived from the alleged pattern of 

9 racketeering activity in the establishment of National's Bronx 

10 facility. The matter of whether or not defendants "directly or 

11 indirectly" invested or used proceeds derived "directly or 

12 indirectly" from such activity, 18 U.S.C. § 1962(a), is clearly a 

13 question of fact that could not properly be resolved by the court 

14 on summary judgment. 

15 The district court, as set forth in Part I.C. above, ruled 

16 that defendants were entitled to summary jUdgment because it found 

L7 the evidence insufficient to show that Ideal's alleged loss of 

18 

19 

20 

21 

22 

23 

24 

25 

sales was proximately caused by defendants' 

that it would be "purely speculative 

conduct. In ruling 

to conclude that 

Ideal's alleged injuries resulted from Defendants' conduct," 

Ideal IV, 2009 WL 1883272, at *6, the court pointed to other 

possible factors, including the decisions of individual customers, 

the quality of Ideal's steel products, actions taken by other 

steel companies in the area, and decisions by Ideal ' s management 

as to whether to match National's prices, ~ id. We conclude 

- 32 -
1 that none of t hese factors justified granting judgment. against. 

2 Ideal as a matter of law. 

3 As a general matter, the district court viewed the 

4 proximat.e cause inquiry as the same for a claim under subsection 

5 (al as for one under subsect.ion (c), and it does not appear to 

6 have given effect to the different referents required by the 

7 different prohibitions. In Ideal III, the Court found that 

8 proximate cause was lacking for Ideal ' s subsection (cl claim 

9 because" the cause of Ideal's harm was I a set of actions (offering 

1 0 lower prices) entirely distinct from the alleged RICO violation 

11 (defrauding the State) .'" Hemi, 130 S. Ct. at 990 (describing and 

12 quoting Ideal III, 547 U.S. at 458) Hemi emphasized that the 

13 Supreme Court 1 s RICO proximate cause precedents make "clear 

14 that ' the compensable injury flowing from a [RICO] violation 

15 "necessarily is the harm caused by [the] predicate acts, II'" 130 

16 S. Ct. at 991 (quoting Ideal III, 547 U.S. at 457 (quoting Sedima, 

17 473 U.S. at 497» With respect to Ideal's subsection (al c laim, 

18 however, the act constituting the violation is the very act that 

19 causes the harm: the use or investment of the funds derived from 

20 the pattern of mail and wire frauds to establish and operate the 

21 Bronx store is both the violation and t.he cause of Ideal's lost 

22 

23 

sales. The district court, 

individual purchasers 

in stating that "[t] he decisions of 

have been held to constitute an 

24 independent intervening act between the alleged RICO violations 

25 and the alleged injuries, II Ideal IV, 2009 WL 1883272, at * 5 , does 

26 not appear to have focused on the fact that the alleged subsection 

- 33 -
1 (a) violation itself, the investment or use of all or part of the 

2 income derived directly or indirectly from the racketeering 

3 activity in the establishment or operation of a store that simply 

4 by its existence attracts customers away from a competitor, may be 

5 the direct cause of injury to the plaintiff in its business or 

6 property. 

7 We note also that the only cases cited by the district 

8 court as holding that decisions of individual purchasers are an 

9 intervening cause that defeats proximate cause were district court 

10 cases. In Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 

11 651 (2008), the Supreme Court, in rejecting the proposition that a 

12 civil RICO plaintiff complaining of a pattern of mail fraud must 

13 prove its own reliance, proffered the following hypothetical: 

14 suppose an enterprise that wants to get rid of rival 

15 businesses mails misrepresentations about them to 

16 their customers and suppliers, but not to the rivals 

1 7 themsel ves. I f the rival businesses lose money as a 

18 result of the misrepresentations, it would certainly 

19 seem that they were injured in their business "by 

20 reason of" a pattern of mail fraud, even though they 

21 never received, and therefore never relied on, the 

22 fraudulent mailings. 

23 Id. at 649-50. Plainly, in this hypothetical, the fact that the 

24 plaintiff ' s l oss of business would have resulted from customer 

25 decisions does not defeat proximate cause. 

26 The district court also found an intervening cause in the 

27 fact that "Brancato testified that at various times between 1996 

28 and 2003 Ideal received and accepted from its vendors steel 

29 products that were bent and rusty . II Ideal IV, 2009 WL 1883272, 

30 at *6 (internal quotation marks omitted). The court' s reliance on 

- 34 -
1 the possibility that Ideal may have lost business because of 

2 inferior products suffers two flaws. First, that possibility 

3 raises a question of but-for causation, rather than proximate 

4 causation; but-for causation is an issue of fact for the jury, 

5 see,~, Jett v. Dallas Independent School District, 491 U.S. 

6 701, 737 (1989), not, where there is evidence to support a finding 

7 of causation, a matter to be decided by the court on a motion for 

8 summary judgment. Second, the record did not compel the court's 

9 inference as a matter of fact. The deposition testimony to which 

10 the court referred explained that some products that are 

11 unsuitable for one category of customers may well be welcomed by 

12 another category; the testimony did not state that any customers 

13 who purchased from Ideal were dissatisfied. (See,~, Brancato 

14 Oep. at 318-35,) The court's suggestion that Ideal lost customers 

15 because of inferior products plainly did not view the record in 

16 the light most favorable to Ideal. 

17 The court's additional suggestion that Ideal may have lost 

18 sales because of "actions taken by other steel companies in the 

19 area," Ideal IV, 2009 WL 1883272, at *6, does not appear to have 

20 any anchor in the record. Nothing has been called to our 

21 attention to suggest that the 1998-2000 conduct--or sales volume--

22 of any such companies, which provided no real competition for 

23 Ideal (see Brancato Dep. at 283), changed in 2001-2002, when 

24 Ideal's sales dropped by one-third (and the sales of National, 

25 with its new facility, increased by 24 - 47%) . 

- 35 -
1 Finally, the court ' s suggestion that Ideal may have lost 

2 sales because of its " business decisions--~, to lower its 

3 prices to compete with National, " Ideal IV, 2009 WL 1883272, at 

4 *6, seems to have lost sight of the alleged RICO violation, i . e., 

5 the investment of racketeering activity funds to establish the 

6 National facility in the Bronx. Had the investment not been 

7 made, there would have been no National prices for Ideal to match. 

8 CONCLUSION 

9 We have considered all of defendants' arguments in support 

1.0 of the judgment and have found them to be without merit. The 

11 judgment of the district court is vacated, and the matter is 

12 remanded for trial. 

- 36 -
1 See, e.g., William H. Rehnquist, Remarks of the Chief Justice, 21 St. Mary's L.J. 5, 9-21 (1989); William H.

Rehnquist, Get Rico Cases Out of My Courtroom, Wall St. J., May 19, 1989, at A14; David B. Sentelle, Civil RICO: The Judges’

Perspective, and Some Notes on Practice for North Carolina Lawyers, 12 Campbell L. Rev. 145 (1990). 

To be sure, RICO—and its application in civil suits—is not without its defenders. See, e.g., G. Robert Blakey &

Thomas A. Perry, An Analysis of the Myths that Bolster Efforts To Rewrite RICO and the Various Proposals for Reform: “Mother of

God—Is this the End of RICO?”, 43 Vand. L. Rev. 851 (1990) (defending the “legitimacy” of RICO); G. Robert Blakey,

Civil RICO: A Rebuttal to Some Myths Spurring Reform Effort in Congress, Nat'l L.J., Aug. 3, 1987, at 26 (a defense of civil

RICO). It should be noted, however, that its defender-in-chief, Professor Blakely, was the Chief Counsel of the Senate

Subcommittee in Criminal Laws and Procedure when the RICO statute was passed, see Gary S. Abrams, The Civil RICO

Controversy Reaches the Supreme Court, 13 Hofstra L. Rev. 147, 149 n.9 (1984), and is touted as one of its chief architects, see,

e.g., G. Robert Blakey, The RICO Civil Fraud Action in Contaxt: Reflections on Bennett v. Berg, 58 Notre Dame L. Rev. 237,

237 n.3 (1982).

1

1 JOSÉ A. CABRANES, Circuit Judge, dissenting:

2

3 We encounter here another chapter in the long saga of civil RICO and its discontents. Since

4 its enactment in 1970, the civil RICO statute, Racketeer Influenced and Corrupt Organizations Act,

5 18 U.S.C. §§ 1961-1968, has exasperated generations of federal judges and practitioners and

generated a vast, and often skeptical, literature.1 6

7 The dispute presently before us involves competing small businesses in the steel mill

8 products trade. It has already consumed nine years of litigation in the federal courts, including one

9 trip to the Supreme Court, see Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) (to employ the

10 citation adopted by today’s majority opinion, “Ideal Steel III”). One eventful trip to 1 First Street

11 surely deserves another.

12 * * *

13 From its beginnings before Judge Richard Berman, a seasoned federal trial judge, 

14 the case has presented the question whether plaintiff Ideal Steel Corporation (“Ideal”) can deploy

15 the heavy legal armaments of RICO in a civil action against its chief rival, National Steel Supply, Inc.

16 (“National”), based on National’s alleged illegal business practices. 

17 In its complaint, Ideal raised two distinct civil RICO claims, one under 18 U.S.C. §
2 In relevant part, § 1962(a) provides:

It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern

of racketeering activity or through collection of an unlawful debt in which such person has participated as a

principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly,

any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment

or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign

commerce. 

18 U.S.C. § 1962(a). 

3 Section 1962(c) states, in full, that “[i]t 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.” 18 U.S.C. § 1962(c) (emphasis added).

4 In relevant part, § 1964(c) provides that “[a]ny person injured in his business or property by reason of a

violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover

threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee[.]” 18 U.S.C. § 1964(c). 

 

2

1962(a)2

 and the other under 18 U.S.C. § 1962(c).3 1 Claims under each of these provisions “must be

2 asserted under [18 U.S.C.] § 1964(c),” id. at 461-62, which provides a cause of action to persons

injured “by reason of” a defendant’s alleged RICO violation, 18 U.S.C. § 1964(c).4 3 

4 Ideal’s § 1962(c) claim alleged that National’s owners, Joseph and Vincent Anza, conducted

5 the affairs of an interstate business enterprise (National) “through a pattern of racketeering

6 activity”—specifically, by refraining from charging their cash-paying customers requisite New York

7 sales tax and by subsequently filing false tax returns with the State of New York. See Ideal Steel III,

8 547 U.S. at 454. The Supreme Court rejected this claim, id. at 461, and directed us to consider on

9 remand the § 1962(a) claim, which accuses the Anzas and National (jointly, “defendants”) of

10 investing funds derived from the alleged tax fraud scheme in order to open and operate a new store in the

11 Bronx. Id at 462. We are thus required to ascertain whether Ideal adequately pleaded its § 1962(a)

12 civil RICO suit against defendants—in particular, we are asked to determine “whether [defendants’]

13 alleged violation of § 1962(a) proximately caused the injuries Ideal asserts.” Id. at 462. Unlike my
3

1 colleagues, I think that the “‘relation between the injury asserted and the injurious conduct alleged’”

2 in Ideal’s § 1962(a) claim is, like its § 1962(c) claim, too remote and speculative to satisfy the

3 necessary proximate-cause analysis. Id. (quoting Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268

4 (1992)). Accordingly, I respectfully dissent. 

5

6

7 I.

8

9 In Ideal Steel III, the Supreme Court held that Ideal could not maintain its RICO claim under

10 § 1962(c), see note 2, ante, because it failed to satisfy the requirement of proximate causation set forth

11 in Holmes, 503 U.S. 258. See Ideal Steel III, 547 U.S. at 461. The Court concluded that the relation

12 between the injurious conduct alleged (defrauding a third party, the State of New York, of tax

13 revenues) and the injury asserted by Ideal (lost sales due to the competitive advantage thus gained by

14 National) was too attenuated to establish proximate cause. Id. at 458. The Court found support for

15 this conclusion by considering the “underlying premises” of the “directness requirement[ ]” that

16 must be satisfied in order to prove that a defendant’s actions have proximately caused injury to a

17 plaintiff. Id. The Court held that Ideal’s theory of recovery under § 1962(c) was simply too remote

18 and too dependent on contingent propositions to meet this requirement. See id. at 458-60. 

19 We must now evaluate whether Ideal’s claim under § 1962(a) can withstand the proximate

20 causation analysis set forth in Ideal Steel III and Holmes. See id. at 462 (“The proximate-cause inquiry .

21 . . requires careful consideration of the ‘relation between the injury asserted and the injurious

22 conduct alleged.’ Because § 1962(c) and § 1962(a) set forth distinct prohibitions, it is at least

23 debatable whether Ideal’s two claims should be analyzed in an identical fashion for proximate-cause

24 purposes.” (quoting Holmes, 503 U.S. at 268)). 

25 The essence of Ideal’s claim under § 1962(a) is that defendants used funds earned directly or

26 indirectly from the alleged “pattern of racketeering activity” in order to help establish or operate a
4

1 new facility in the Bronx, and that the operations of this new store had the effect of substantially

2 decreasing Ideal’s sales, profits, and local market share. See Ideal Steel Supply Corp. v. Anza, No. 02

3 Civ. 4788, 2009 WL 1883272, at *4 (S.D.N.Y. June 30, 2009). The “proper referent” for proximate

4 causation analysis of the § 1962(c) claim in Ideal Steel III was defendants’ “alleged practice of

5 conducting National’s business through a pattern of defrauding the State [of New York]” of tax

6 revenues, Ideal Steel III, 547 U.S. at 458, while the proper referent of our proximate causation

7 analysis under § 1962(a) is the defendants’ investment of income acquired through the alleged

8 pattern of racketeering activity into the creation of a new store that competed with Ideal. 

9 The majority opinion concludes that this theory of causation for the § 1962(a) claim is more

10 direct and certain than Ideal’s failed § 1962(c) claim. See Majority Op. at 20-21. The principal failure

11 of the § 1962(c) claim, as the Supreme Court pointed out, was that plaintiffs could not demonstrate

12 that the money defendants saved by allegedly committing tax fraud was used in such a way as to

13 ultimately result in increased competition for Ideal’s business. See Ideal Steel III, 547 U.S. at 459. The

14 § 1962(a) claim is said to be different, however, in the following way: although the alleged offense

15 under § 1962(c) is the “racketeering activity” itself (here, tax fraud), the alleged offense under §

16 1962(a) is the reinvestment of the funds derived from the racketeering activity. Although the only

17 legally cognizable victim of the tax fraud was the State, see Ideal Steel III at 458, the Court suggested

18 that there is arguably a larger set of potentially cognizable victims affected by the reinvestment of the

19 ill-gotten funds. Thus, under § 1962(a), Ideal’s “injury” may be more closely connected to

20 defendants’ alleged conduct. 

21 Nevertheless, the link between (i) the use of racketeering (or, “ill-gotten”) funds to help

22 establish National’s new store in the Bronx, and (ii) the ultimate impact on Ideal’s bottom line, is not

23 nearly as direct as Ideal—and the majority—seems to believe. Critically, the alleged illegal activity is

24 not National’s creation of a new store in the Bronx—on its own, a perfectly legitimate, competitive
5

1 pursuit—but rather, defendants’ investment of ill-gotten proceeds. 

2 This distinction is important. It may be that the Bronx facility would not exist but for the

3 alleged ill-gotten investment; on the other hand, it may also be that the economic projections

4 concerning the development of a National facility in the Bronx were so promising, and access to

5 abundant capital so cheap, that the decision to open the Bronx store was unaffected (either in terms

6 of its opening date or the scope of its operations) by whatever ill-gotten proceeds were available. 

7 Although the truth likely lies somewhere in between, it is doubtful that any court could come up

8 with a reasonably certain answer in light of the overwhelming number of variables inherent in this

9 inquiry.

10 Nor would the causation analysis be resolved, even if we assumed, for the argument, that the

11 impact of the ill-gotten investment on the operation of National’s Bronx facility could be readily

12 ascertained. Rather, we would next be obliged to determine precisely how this impact “injured”

13 Ideal (apart from the myriad other factors that may have adversely affected Ideal’s business). “The

14 element of proximate causation recognized in Holmes is meant to prevent these types of intricate,

15 uncertain inquiries from overrunning RICO litigation. It has particular resonance when applied to

16 claims brought by economic competitors, which, if left unchecked, could blur the line between

17 RICO and the antitrust laws.” Ideal Steel III, 547 U.S. at 460. 

18 II.

19 The danger of blurring the line between RICO and the antitrust laws is a real one. Justice

20 Breyer’s separate opinion in Ideal Steel III is particularly instructive in explaining why this is so. If, as

21 today’s panel opinion suggests, companies can pursue civil RICO claims against their competitors on

22 the basis of allegations that ill-gotten proceeds have funded perfectly legitimate and competitive

23 pursuits, RICO can be misused as a weapon against competition in the marketplace. As Justice

24 Breyer observed, “[f]irms losing the competitive battle might find bases for a RICO attack on their
6

1 more successful competitors in claimed misrepresentations or even comparatively minor misdeeds

2 by that competitor.” Ideal Steel III, 547 U.S. at 485 (Breyer, J., concurring in part and dissenting in

3 part). Indeed, businesses that are suffering economically as a result of increased competition would

4 surely be tempted to accuse its competitors of financial, or other, malpractices on the part of

5 competitors, in order to seek treble-damages under RICO, as Ideal has here. 

6 In light of (i) the broad scope of RICO (and what might constitute proceeds from a RICO

7 “predicate act”), and (ii) the specter of paying treble damages, the mere threat of such a suit would

8 chill competition. When one considers the number of different entities that could plausibly allege to

9 have been “injured” by the market activity in question—various competitors, suppliers to the

10 various competitors, etc.—the potential threat is compounded. As this very case establishes, it does

11 not take an elaborate or unusual set of facts for a business to be subjected to a seriously threatening

12 RICO suit by a competitor; after all, the essence of the present suit is that defendants allegedly filed

13 false tax returns and then used the corresponding savings to open a new store that enabled them to

14 compete more effectively (and unfairly), reducing the profits and value of Ideal’s business. “Firms

15 that fear such treble-damages suits might hesitate to compete vigorously, particularly in concentrated

16 industries where harm to a competitor is more easily traced but where the consumer’s need for

17 vigorous competition is particularly strong. The ultimate victim of any such tendency to pull

18 ordinary competitive punches of course would be not the competing business, but the consumer.”

19 Ideal Steel III, 547 U.S. at 485-86 (Breyer, J., concurring in part and dissenting in part).

20 If today’s majority were right on the law, the adverse consequences of its

21 holding—stemming from a broad interpretation of the RICO statute—would ordinarily be a

22 concern reserved for the attention of Congress. But, as Justice Breyer recognized, Congress has

23 already spoken to this question through the antitrust laws. “The basic objective of antitrust law is to

24 encourage the competitive process. In particular, [antitrust law] encourages businesses to compete
7

1 by offering lower prices, better products, better methods of production, and better systems of

2 distribution.” Id. at 482 (citing Phillip E. Areeda and Herbert Hovenkamp, Antitrust Law: An

3 Analysis of Antitrust Principles and Their Application ¶100a, pp. 3-4 (2d ed. 2000)). While it is true

4 that antitrust law is far from the exclusive means by which Congress seeks to regulate conduct

5 between competitive businesses, “there is no sound reason to interpret RICO’s treble-damages

6 provision as if Congress intended to set it and its antitrust counterpart at cross-purposes.” Id. at

7 486.

8 As Justice Breyer noted, it is difficult enough to establish causation in antitrust cases where

9 plaintiffs seek to link certain economic injuries to specified anti-competitive conduct. Id. at 484. But at

10 least in those cases, all concerned, including the parties and the court, have a reasonable prospect of

11 identifying what might have happened had the relevant industry not been exposed to improper anti12 competitive activity where the injurious conduct can be distinguished from otherwise competitive

13 market conditions. The task becomes significantly more difficult when courts have to consider what

14 might have happened absent some specified pro-competitive activity—activity that will likely be all but

15 impossible to isolate in the context of an efficient market.

16 Justice Breyer’s solution to the problems identified above was to assert that § 1964(c)’s

17 proximate causation requirement (as applied to both § 1962(a) and § 1962(c)) “places outside the

18 provision[s] harms that are traceable to an unlawful act only through a form of legitimate

19 competitive activity.” Id. at 486. In other words, “ordinary competitive actions undertaken by the

20 defendant competitor cut the direct causal link between the plaintiff competitor’s injuries and the

21 forbidden acts.” Id. at 482. Justice Breyer’s proposed “test” is consistent with the proximate

22 causation analysis for § 1962(c) articulated in the majority opinion in Ideal Steel III. Under Ideal Steel

23 III’s own terms, a civil RICO plaintiff will almost invariably be prevented from recovering under §

24 1964(c) for harms that are traceable to an unlawful act but that reveal themselves only through a
8

1 form of legitimate competitive activity. Any such suit would necessarily require an analysis of (a) the

2 impact of the alleged unlawful act on the legitimate competitive activity in question, and (b) the

3 economic harm to plaintiffs directly attributable to the change in legitimate competitive activity

4 caused by the ill-gotten investment. This is exactly the intricate, speculative, and highly contingent

5 analysis that Ideal Steel III spurned. See id. at 460 (majority op.).

6 In sum, with Justice Breyer, “I believe that the financing of a new store—even with funds

7 generated by unlawful activities—is not sufficient to create a private cause of action as long as the

8 activity funded amounts to legitimate competitive activity.” Id. at 487 (Breyer, J., concurring in part

9 and dissenting in part). By holding otherwise, the majority has warped civil RICO into a tool that

10 aggrieved business interests will use to harass and undermine competitors engaged in legitimate,

11 competitive business activities. This in turn will put the courts in the nearly impossible position of

12 having to ascertain which otherwise legal marketplace activity can be directly linked to ill-gotten

13 investments and which cannot. Accordingly, I would affirm the judgment of the District Court that

14 Ideal failed to state a claim upon which relief can be granted.