In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 07-3222

RWB SERVICES, LLC,

Plaintiff-Appellant,

v.

HARTFORD COMPUTER GROUP, INC., ET AL.,

Defendants-Appellees.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 07 C 1073—Ruben Castillo, Judge.

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ARGUED MAY 9, 2008—DECIDED AUGUST 25, 2008

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Before FLAUM, KANNE, and TINDER, Circuit Judges.

FLAUM, Circuit Judge. The plaintiff-appellant, RWB

Services, LLC, says that the defendants misappropriated

used cameras in which it had security interests and

then resold the cameras as new to Wal-Mart. In the

district court, the vessels for this allegation were a number of state-law claims and one civil count under the

Racketeer Influenced and Corrupt Organizations Act, 18
2 No. 07-3222

U.S.C. § 1964(c)—the latter of which forms the basis of this

appeal. Below, the defendants moved to dismiss the

RICO count under Rule 12(b)(1), arguing that the plaintiff

lacked the requisite standing and, as a result, the district

court did not have subject matter jurisdiction. The district

court agreed, dismissed the RICO claim, and remanded

the remaining state-law claims to the Circuit Court of

Cook County. This appeal resulted, and for the reasons

that follow, we reverse.

I. Background

The allegations in this case stem from a commercial

lending agreement originally entered into between RWB

Services and a now-defunct company called Old Argus

in 2003. The agreement was for the purchase and sale of

cameras. Under the terms of the agreement, Old Argus

would secure the sale of a number of cameras to a particular retailer, in this case Wal-Mart. After being notified of

the sale, RWB Services would purchase the needed number

of cameras from vendors on Old Argus’s behalf, and Old

Argus would then deliver the cameras to and receive

payment from Wal-Mart. The proceeds from these sales

would go into a bank account held by a special purpose

entity, WIP Marketing, Inc., created for purposes of the

lending arrangement. RWB Services would then

draw down Old Argus’s debt from this account. To

ensure that this would happen, RWB Services retained

a security interest in all of WIP Marketing’s assets including, specifically, the purchased cameras.
No. 07-3222 3

Rather than go into the account set up by WIP Marketing, the 1

payment went into a BankOne account held by Old Argus. The

parties then agreed that these funds would go to RWB Services

to repay the loan.

RWB Services alleges that Hartford (and possibly Rally 2

Capital) engaged in a mock bid to justify turning away two

other bidders. Specifically, RWB Services says that two other

bidders offered to purchase Old Argus’s assets for $2.4 million.

Hartford then submitted a slightly higher bid for $2.5 million,

which Old Argus’s assignee told the two bidders it would

accept. At some point, Hartford allegedly withdrew this bid

and, without contacting the two rebuffed bidders, Rally Capital

eventually accepted a much lower bid for $1.3 million.

With one minor hitch, the parties followed this process 1

the first time through, and on June 3, 2003, RWB Services

loaned Old Argus an additional $951,000 to purchase

another set of cameras. Unbeknownst to RWB Services,

however, storm clouds had gathered over Old Argus’s

general ledger, and shortly after agreeing to the second

round of financing, Old Argus entered into an assignment for the benefit of creditors, with a company called

Rally Capital Services, LLC as the assignee. After allegedly

chasing off two other bidders, Rally Capital eventually 2

sold all of Old Argus’s assets for approximately

$1.3 million to another defendant, Hartford Computer

Group, Inc. As part of the sale, Hartford agreed to collect

Old Argus’s existing receivables but was expressly precluded from obtaining any interest in the WIP Marketing

inventory or any of the cameras funded by RWB Services.

All moneys owed for the cameras were to go to RWB

Services, as were, importantly, any returned cameras.
4 No. 07-3222

It is what followed that resulted in this case. RWB

Services alleges that Hartford and its managers—defendants Anthony Graffia Senior and Junior—cooked up a scheme to defraud Old Argus’s former

customers. For any number of reasons, retailers like WalMart will return cameras to their distributors; customers

may return unwanted but functioning cameras or there

could be something wrong with the camera itself. When

this happened under Old Argus’s watch, Old Argus

would give its customer a credit for any returned cameras,

which the customer could then draw from in making

future purchases. When Hartford took over Old Argus’s

assets, there were a number of returned cameras from WalMart that Old Argus still had in its possession. RWB

Services alleges that, rather than return these cameras to

RWB Services as required, Hartford instead repackaged

and then resold them to Wal-Mart as new. In addition,

it claims that Hartford both told Wal-Mart to pay

amounts owed for kept cameras directly to Hartford—

rather than to RWB Services—and took possession of

returned cameras from Wal-Mart—rather than send them

to RWB Services as promised. RWB Services claims that

Hartford sold 50,000 repackaged cameras as new.

Realizing that the faucet of payments for its loan had

dried, RWB Services demanded payment from Hartford, a

request that Hartford refused. RWB Services claims that

this scheme of repackaging cameras and selling them as

new continued apace through at least March 2005, involving both its cameras and those of others. That month,

Hartford transferred most of its assets to a new company,

Impero Electronics, which RWB Services alleges was a
No. 07-3222 5

shell for the Graffias. Impero allegedly continued on

with Hartford’s alleged scheme, repackaging different

brands of returned cameras as new.

RWB Services initially filed suit against Hartford,

Impero, Rally Capital Services, and the Graffias in 2004. In

January 2007, RWB Services filed its Fourth Amended

Verified Complaint, which added to the nine state-law

claims a new one alleging a RICO violation against the

Graffias, Hartford, and Impero. The defendants removed

the case to the Northern District of Illinois. And on

August 22, 2007, the district court granted the defendants’

motion to dismiss, reasoning that RWB Services had failed

to show standing to sue under RICO. The basis for its

jurisdiction was the federal RICO claim, and, after this

claim fell, the court relinquished supplemental jurisdiction over the remaining state claims. This appeal followed.

II. Discussion

The civil RICO cause of action arises under 18 U.S.C.

§ 1964(c), which provides

Any 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.

As is relevant here, this cause of action requires RWB

Services to adequately plead three things: (1) an “injur[y]

in [its] business or property” (2) “by reason of” (3) the
6 No. 07-3222

defendants’ “violation of section 1962.” See 18 U.S.C.

§ 1962(c). The district court held that RWB Services failed

at step two, a decision we review de novo, accepting any

factual allegations that RWB Services has properly pled. See

Vicom, Inc. v. Harbridge Merchant Svces, Inc., 20 F.3d 771,

776-77 (7th Cir. 1994).

RWB Services alleged in its pleadings that its injury

arose because it “was deprived of its property which

Defendants stole or obtained by fraud [and] then fraudulently resold as new.” When Hartford purchased Old

Argus’s assets, the sale expressly excluded RWB Services’

cameras. Nonetheless, Hartford kept the returned cameras

sent back from Wal-Mart and then resold them as new. As

a result, RWB Services’ “property” was thus “injured”

when Hartford converted these cameras to use in its

purportedly fraudulent scheme.

In addition to its injury, RWB Services alleged that the

defendants had “violat[ed] 18 U.S.C. § 1962,” specifically

sections 1962(c) and (d). Section 1962(c) makes it 

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). And section 1962(d) makes it “unlawful

for any person to conspire” to violate any other subsection

of section 1962. 18 U.S.C. § 1962(d). In RWB Services’

estimation, the Graffias both operated an “enterprise”

involved in interstate commerce—Hartford, then
No. 07-3222 7

Impero—through a “pattern of racketeering activity,” 18

U.S.C. § 1962(c) and conspired to do the same, 18 U.S.C.

§ 1962(d).

To prove the “pattern of racketeering activity,” RWB

Services pointed to the violation of five of the statutes laid

out or referenced in 18 U.S.C. § 1961(1) as predicate acts:

the Illinois Consumer Fraud and Deceptive Business

Practices Act, 815 ILCS 505/1; 18 U.S.C. § 1341 (mail

fraud); 18 U.S.C. § 1343 (wire fraud); 18 U.S.C. § 1344

(bank fraud); and 18 U.S.C. § 2314 (the interstate transportation of stolen or fraudulently obtained

property). Four of these acts relate to the scheme to defraud Wal-Mart by selling repackaged cameras as new,

consisting of the three claims of fraud and one of deceptive

trade practices under Illinois law. The other act alleges

the transportation of stolen or fraudulently obtained

property across state lines, an act that relates to RWB

Services’ loss of its cameras. The parties do not dispute

here that RWB Services has properly pled a “violation

of section 1962.”

The question on appeal is instead whether RWB Services

showed that its injury occurred “by reason of” this alleged

“violation.” Such a showing proves the plaintiff’s standing

and is thus jurisdictional. Gagan v. American Cablevision,

77 F.3d 951, 958 (7th Cir. 1996). And to make it, the plaintiff must prove, among other things, that the “pattern of

racketeering activity” both factually and proximately

caused its “injur[y]”. Holmes v. Securities Investor Protection

Corp., 503 U.S. 258, 268 (1992). The district court held that

RWB Services had failed to show either. As for factual or
8 No. 07-3222

“but for” causation, the district court pointed to a “gap”

in RWB Services’ causal chain: The court doubted that

RWB Services would still have received the cameras back

even if Hartford had not defrauded Wal-Mart with them.

The court also reasoned that RWB Services was not the

“direct victim of Defendants’ alleged scheme.” Accordingly, Wal-Mart or its customers would be better plaintiffs

because the alleged scheme was primarily to defraud them.

Having failed on both fronts, the court held that RWB

Services did not have standing—and thus the court did not

have jurisdiction—and dismissed the complaint.

We disagree with both conclusions. First, RWB Services

properly pled cause in fact. RICO’s civil provision gives

a cause of action for those “injured in his business or

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

§ 1964(c). The question here is whether the plaintiff’s

injury would have occurred “but for” the “violation of

section 1962.” Holmes v. Securities Investor Protection Corp.,

503 U.S. 258 , 268 (1992); Sedima, S.P.R.L. v. Imrex Co., Inc.,

473 U.S. 479, 495 (1985) (“If the defendant engages in a

pattern of racketeering activity in a manner forbidden by

these provisions, and the racketeering activities injure the

plaintiff in his business or property, the plaintiff has a

claim under § 1964(c).”); see also Evans v. City of Chicago, 434

F.3d 916, 926 n.22 (7th Cir. 2006). The typical question

asked in determining cause-in-fact is counterfactual:

would the claimed injury still have happened if the

defendant had not engaged in the tortious conduct alleged?

See W. PAGE KEETON ET AL., PROSSER AND KEETON ON TORTS

264 (5th ed. 1984); RESTATEMENT (THIRD) OF TORTS: LIABILITY FOR PHYSICAL HARM § 26, cmt. b (Proposed Final Draft
No. 07-3222 9

The district court’s opinion also appears to limit the alleged 3

injury to the lost stream of payments from Hartford, a breach of

contract claim. There is admittedly some looseness at points

in the complaint with respect to the injury. But RWB Services’

alleged injury as it relates to the final predicate act concerns

its lost cameras. Nonetheless, for the reasons stated by the

district court, we agree that RWB Services could not show

causation under section 1964(c) with respect to this stream

of payments, as opposed to its stolen or lost cameras.

No. 1 2005). This inquiry is a straightforward one in the

mine-run tort or negligence claim. A railway fails to fence

off a railroad track, and a child is struck by a train; had

the railway put up a fence, the child could not have

accessed the tracks and the accident would never have

happened. See PROSSER AND KEETON ON TORTS, at 264. Or

one person converts another’s property; but for the conversion the loss of property would not have occurred.

Under RICO, however, such a simple question is harder

to ask. A defendant is liable for a “violation of section

1962,” and such a “violation” consists of, among other

things, a “pattern of racketeering activity,” which in turn

results from at least two predicate acts each with its

own essential elements. The district court reasoned that, if

the defendants had not obtained RWB Services’ cameras

in order to defraud its customers, they would have misappropriated the cameras anyhow or still refused to repay

the loan. Or, in other words, but for the actions under- 3

lying a few of the predicate acts alleged—those four

constituting the scheme to defraud Wal-Mart—RWB

Services’ injury would still have occurred. A literal ap-
10 No. 07-3222

plication of the “but for” counterfactual could lead to

this articulation of the standard; for it is undeniably true

that but for the existence of the “pattern,” or a predicate

act, or its elements, there would be no “violation of section

1962.”

But we think the relevant question is instead whether the

plaintiff’s alleged injury would have resulted but for the

entire “violation of section 1962.” Anza, 547 U.S. at 457

(listing requirement that “the defendant’s violation . . . was

a ‘but for’ cause of his injury”) (quoting Holmes, 503 U.S. at

268); cf. 1 DAN B. DOBBS, THE LAW OF TORTS 417-18 (West

Group 2001). Although the plaintiff still must allege an

injury resulting from one of the predicate acts, see Beck v.

Prupis, 529 U.S. 494, 506 (2000), courts must examine

these acts in the context of the entire “violation” when

assessing factual causation. If a predicate act was sufficient to cause the plaintiff’s injury and that predicate

act was part of the entire “violation of section 1962,” the

plaintiff has pled causation.

Here, the allegations in the complaint are that the

defendants developed a scheme to defraud Wal-Mart and

other customers by stealing or fraudulently obtaining used

cameras and reselling them as new. One part of the scheme

consisted of defrauding Wal-Mart. Specifically, RWB

Services alleges that the “Defendants’ pattern of racketeering is evidenced by [their] ongoing actions of fraudulently

and illegally selling returned, repackaged cameras . . . as

new.” In turn, RWB Services pled four predicate acts

relating to these purportedly fraudulent sales: deceptive

business practices under Illinois law, and federal mail,
No. 07-3222 11

wire, and bank fraud. The other part of the scheme consisted of obtaining the cameras. RWB Services alleges that

the defendants “obtained the returned RWB cameras by

fraud.” Specifically, RWB Services says that Hartford

improperly kept its cameras after purchasing Old Argus’s

assets and kept returned cameras from Wal-Mart rather

than send them back to RWB Services. Nor, as alleged,

was RWB Services alone; there were other alleged victims

who lost their cameras as part of this scheme. These

allegations relate to the last predicate act: the interstate

transportation of stolen or fraudulently obtained property.

18 U.S.C. § 2314.

The district court did not question and the parties do not

dispute that these two parts of the scheme collectively

formed a “pattern,” meaning they were related and in

some sense ongoing. See H.J. Inc. v. Northwestern Bell

Telephone Co., 492 U.S. 229, 239 (1989); Corley v. Rosewood

Care Center, Inc. of Peoria, 388 F.3d 990, 1002 (7th Cir. 2004).

So we assume that the requirement has been met, as the

parties have waived the issue. Local 15, Intern. Brotherhood

of Elec. Workers, AFL-CIO v. Exelon Corp., 495 F.3d 779, 783

(7th Cir. 2007) (quoting Williams v. REP Corp., 302 F.3d

660, 666 (7th Cir. 2002)). As a result, the part of the

scheme concerning the acquisition of the cameras did not

happen for just any reason. Instead, as alleged, the defendants took them precisely because of the need for the

cameras in order to “violat[e] section 1962.” And as the

one whose property was allegedly stolen or fraudulently

obtained as part of this “violation,” RWB Services has

pled the requisite causal connection between its injury—

lost cameras—and the scheme.
12 No. 07-3222

Second, we disagree that RWB Services’ injury was not

proximately caused by the “violation of section 1962.”

Proximate cause is a flexible concept that “label[s] generically the judicial tools used to limit a person’s responsibility for the consequences of that person’s own acts.” Holmes

v. Securities Investor Protection Corp., 503 U.S. 258, 269

(1992). At some point, even those who may claim a factual

injury are too far removed from the tortious act to be

able to recover. In examining whether a RICO violation

proximately caused the plaintiff’s injury, “the central

question . . . is whether the alleged violation led directly to

the plaintiff’s injuries.” Anza v. Ideal Steel Supply Corp., 547

U.S. 451, 461 (2006). Saying that the injury to the plaintiff

is “direct” is akin to saying that the victim was reasonably foreseeable, the traditional principle for

hemming in tort liability. Such directness obviates the

difficulty in assessing damages from indirect injuries;

avoids complicated rules for apportioning damages

among several injured parties with greater or lesser

injuries; and provides the requisite level of deterrence for

RICO tortfeasors. Holmes, 503 U.S. at 270. The district

court reasoned that because Wal-Mart was the victim of

the fraud, which formed the greater part of the “violation,”

it was a distinctly better plaintiff than RWB Services. The

injury that RWB Services suffered, the court surmised,

was simply a bump in the road on the path to defraud WalMart.

But here RWB Services was a direct victim of the alleged

scheme, even if Wal-Mart was one as well. The existence

of multiple victims with different injuries does not fore-
No. 07-3222 13

close a finding of proximate cause; in fact, one of the

hallmarks of a RICO violation is “the occurrence of distinct

injuries” affecting several victims. See Morgan v. Bank of

Waukegan, 804 F.2d 970, 975 (7th Cir. 1986) (discussing

“pattern” requirements and listing “relevant factors” as

“includ[ing] the number and variety of predicate acts

and the length of time over which they were committed,

the number of victims, the presence of separate schemes

and the occurrence of distinct injuries”). In addition, the

predicate act that RWB Services claims injured

it—essentially fraud or theft of an interstate nature—has as

its victims those who have their property stolen or fraudulently obtained; and here, that is RWB Services. See United

States v. Bond, 231 F.3d 1075, 1077-79 (7th Cir. 2000); United

States v. Dickerson, 901 F.2d 579, 584-85 (7th Cir. 1990). Nor

is it dispositive that the scheme envisioned defrauding

Wal-Mart as well, who could also potentially bring a

RICO claim. The existence of a “better” plaintiff is most

relevant where the plaintiff alleges only an indirect injury.

See Holmes, 503 U.S. at 272-74; Anza 547 U.S. at 461. It

will not otherwise be grounds for denying a claim to a

plaintiff directly injured by one predicate act in the

hopes that a different one will emerge. As alleged, the

defendants robbed Peter to defraud Paul; the former is as

foreseeable a plaintiff as the latter with as direct an injury.

As a result, RWB Services properly alleged that the

“violation of section 1962” proximately caused the loss

of its cameras.
14 No. 07-3222

III. Conclusion

For the foregoing reasons, we REVERSE the decision

below and REMAND for further proceedings consistent

with this opinion.

8-25-08