Source: https://ricoconsultingattorney.wordpress.com/
Timestamp: 2019-04-24 22:24:04+00:00

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The Court vacated the district court’s judgment dismissing a civil RICO claim on a summary judgment motion, and remanded this case for further proceedings.
Appellants challenge the district court’s order granting partial summary judgment in favor of Defendants River Birch, Inc., Albert Ward, Frederick Heebe and Highway 90, L.L.C (collectively referred as “River Birch”). Plaintiff Waste Management alleged that Defendants bribed former New Orleans Mayor Ray Nagin to shut down a landfill opened in the city in the aftermath of Hurricane Katrina. Plaintiff was the operator of the shuttered landfill, and Defendants owned and operated competing landfills. Plaintiff alleged that the closure of its Chef Menteur landfill caused it to lose business that accrued to the benefit of its competitor, the River Birch landfill.
On summary judgment, the district court concluded that the Rule 56 evidence presented no jury question regarding the essential causation element to Plaintiff’s civil action under RICO, 18 U.S.C. § 1962(c) and (d). Specifically, the district court, without considering whether Defendants’ $ 20,000 campaign contribution was a bribe, held that the summary judgment evidence failed to create a genuine issue of material fact to allow a jury to find that this payment was the but for and proximate cause of Nagin’s decision to shut down Plaintiff’s landfill at Chef Menteur Highway.
The Court found the evidence was sufficient for a jury to make positive findings on both Plaintiff’s claim that the $ 20,000 payment to Nagin (made through shell corporations) was a bribe and that the bribe was causally related to Nagin’s action in shuttering the Chef Menteur landfill.
1. Was there sufficient evidence so that a jury could find $ 20,000 contribution by Defendants to Nagin was a bribe under Louisiana law and thus a “predicate act” under RICO?
The issue is whether the payment was made “with the intent to influence a public official’s conduct in relation to his position, employment, or duty.” The court discussed various facts and scenarios and determined that based on Mouton’s testimony [Mouton was a former commissioner for the Louisiana Department of Wildlife and Fisheries who plead guilty to receiving a bribe] Mouton played a large role in Defendants’ underlying scheme to shutter the Chef Menteur landfill. Because there was a scheme to shutter the Chef Menteur landfill, the evidence suggesting Defendants’ intent to bribe Mouton can be considered by the jury in determining Defendants’ motive and intent in connection with their contribution to Nagin’s campaign. There is also the additional fact that these contributions in the amount of $ 5,000 each were made not in Defendants’ names, but rather by four shell corporations. The Court concluded that It is critical in cases such as this that inferences from circumstantial evidence about intent and motives about which reasonable minds could differ be sorted out by the jury, and thus denied the motion for summary judgment.
2. Was there evidence to support a jury finding that there was a causal connection between Defendants’ $ 20,000 payment and Nagin’s ultimate decision to shut down the Chef Menteur landfill?
The Court discussed various issues and concluded that a reasonable jury could infer causation from Mayor Nagin’s disregard of the evidence that the Chef Menteur landfill was safe and badly needed in the City’s disaster cleanup.
Accordingly, for various reasons, the Court concluded that the record reflected genuine issues of material fact as to both whether the Defendants’ campaign contribution to Nagin was a bribe, and whether the payment was the but for and proximate cause of Nagin’s decision to close the Chef Menteur landfill. Thus, the Court held that Plaintiff has provided sufficient evidence to survive a summary judgment challenge in this case. [A dissenting Judge opined that there was inadequate evidence of causation to bring the case to a jury].
Ed Note: When civil RICOs involve predicate crimes such as bribery, courts often have more leeway to allow those cases to proceed. Bribery is at the heartland of civil litigation and criminal RICO prosecutions. Civil litigants who can plausibly allege felony bribery violations stand a strong chance of successfully litigating their case.
1. Could the allegations in the indictment serve as the basis for a successful civil RICO case under 18 U.S.C. § 1964(c)? Probably not.
There is a vast difference between charging RICO violations and pleading civil RICO claims. The immediate difficulty in bringing such a civil case would be to find plaintiffs proximately and directly injured by the racketeering activity. An applicant to one of the schools who was not admitted, for example, would have a difficult argument alleging proximate and direct injury as a result of bribes paid to school officials. Also, how could non-acceptance to a particular university result in quantifiable losses? The U.S. Government was harmed because of the alleged charitable donations fraud, but the U.S. Government has been held not to have standing to sue for “injur[y] in [its] business or property” under Section 1964(c).
2. Why was the racketeering conspiracy only alleged under 18 U.S.C. § 1962(d), and not under the “substantive RICO” provision of 18 U.S.C. § 1962(c)? Ease of pleading and proof.
Typically, the DOJ seeks to return indictments under section 1962(d) when there are many different defendants and different but related schemes. Examples are indictments of gangs and large drug organizations. This indictment was pleaded in “Glecier” format (named after the Seventh Circuit’s decision in United States v. Glecier, 923 F.2d 496 (7th Cir. 1991)-a broad conspiracy outlining the crimes conspirators agreed would be committed. These “Glecier conspiracy” indictments have been upheld in almost every circuit as sufficiently pleaded under the Supreme Court’s seminal opinion on RICO conspiracy, Salinas v. United States, 522 U.S. 52 (1997). No racketeering acts need to be alleged.
3. Could a civil RICO claim be pleaded this way? No.
Although civil RICO conspiracy claims should be able to be pleaded in this manner, the circuits are almost uniform (with the exception of the Third Circuit) in requiring that civil RICO claims allege that at least one defendant violated the “substantive RICO” provision-Section 1962(c). Consequently, a civil RICO complaint would look very different, with at least one defendant alleged to be liable under Section 1962(c), and other defendants either also named substantively or named as just conspiracy defendants. The plaintiff would need to allege a substantive RICO violation under Section 1962(c) that meets all of the essential elements of the substantive offense; otherwise, the conspiracy allegations in the complaint would be held insufficiently pleaded, and dismissed.
Note: The views expressed in this CONNECT post are those of Mr. Stander and do not represent the views of the American Bar Association, the Section of Antitrust Law, the Competition Torts Committee, or their members.
The Eleventh Circuit first discussed that RICO is widely regarded as a broad statute; indeed, the RICO text itself “provides that its terms are to be ‘liberally construed to effectuate its remedial purposes.” Moreover, the Court discussed the Supreme Court decision in Boyle which emphasized that the definition of enterprise has a wide reach, and the very concept of an association in fact is expansive.” Boyle, 556 U.S. at 944, 129 S.Ct. 2237 (citation omitted). Id. at 1307.
Then, the court addressed the district court’s granting of summary judgment because it determined that the evidence was insufficient to satisfy Boyle’s “purpose” requirement because the record lacked evidence that they originally married for the purpose of engaging in mail or wire fraud. The district court had stated that some additional structure or vehicle must be alleged for the pair to qualify as an association-in-fact enterprise. Id. at 1308.
The Eleventh Circuit disagreed stating that as an initial matter, to satisfy the purpose requirement, neither the text of RICO nor any relevant precedent requires an association-in-fact enterprise to consist of strangers who originally met for the purpose of engaging in illegal activity. “ In construing Boyle, the court stated that the “concept of ‘associat[ion]’ requires both interpersonal relationships and a common interest,” and nothing in that description prevents individuals with preexisting relationships—say, family members or business partners—from later joining together for the common purpose of engaging in illegal activity. The Court cited to decisions in which federal courts have routinely recognized association-in-fact enterprises made up of individuals who had relationships that predated their schemes. Id., at 1308, citing cases. Thus, the relevant “purpose” in an association-in-fact enterprise is the members’ shared purpose of engaging in illegal activity—not the purpose for which they initially became acquainted.
The Court also rejected the lower court’s position that RICO imposes a heightened “structure” requirement for married couples, requirement that the Supreme Court has already expressly rejected in Boyle. The court discussed cases and concluded that what they actually affirm is that a married couple can constitute an association-in-fact enterprise under RICO—or not—depending on the facts of the case.
In examining the facts, the Court stated that they could lead a reasonable juror to conclude that Erika and Ben came together shortly after the consent judgment was entered and orchestrated an asset-concealment scheme for the common purpose of hiding Ben’s assets from Al-Rayes. A marriage certificate does not transform alleged mail and wire fraud into ordinary household management. Id., at 1310.
In summary, the Court stated that to survive summary judgment, Al-Rayes did not need to bolster Erika and Ben’s marital relationship with evidence that the alleged association-in-fact enterprise included a business or other separate entity formed by the couple. Nor did he need to provide evidence that Erika and Ben originally married for the purpose of engaging in mail or wire fraud. Under RICO, the same rules apply to married people as to everyone else. Because the district court applied a heightened standard for association-in-fact enterprises consisting of married couples when it granted summary judgment in Erika’s favor, the Court stated that it must reverse that order.
Ed Note: One issue not discussed is whether the defendant Erika could be “distinct” of an enterprise consisting solely of herself and her husband. Given that practically and legally a married couple itself is an association distinct from each individual, the broad interpretation given to individual defendants and distinction here applies.
1. The Judge did not rule on “distinctness” principles, not addressing such issue when the individual defendants and enterprise constituents were identical. A proper analysis would have been to find the individual defendants distinct from the association in fact of individuals and the legal entity, but find the legal entity not distinct under Riverwoods principles.
2. Importantly, the Judge ruled on this case at trial even though it only involved a breach of contract, thus, no dismissal based upon “garden-variety” fraud.
3. Although ultimately not accepting at trial evidence of the “regular way of conducting [their] ongoing legitimate business” because it was hearsay; does this infer that at the pleading stage, such allegations (which would only be required to be plausible) would be sufficient to allege open-ended continuity?
5. The Judge maintained jurisdiction over the state law claims and ruled in Plaintiffs favor.
Facts: Plaintiff sued Defendants for civil RICO and state law claims based upon breach of contracts by Defendants, i.e., Plaintiff testified that he contacted Defendants “[m]ultiple times” to find out about the status of the items which had not yet been delivered, and to complain about the condition of items he received because they were not in the contracted-for condition. Defendant Korey Blanck, acting as President of Defendant Ace Restaurant Supply. Defendant Nicholas Blanck testified that he worked as an independent contractor for Defendant Ace Restaurant Supply, delivering and cleaning used equipment.
The Magistrate Judge ruled that the Plaintiff had not shown an “enterprise” consisting of Defendant Korey Blanck, Defendant Nicholas Blanck, and Defendant Ace Restaurant Supply. Defendant Korey Blanck testified that he was the President, sole shareholder, and sole decisionmaker of Defendant Ace Restaurant Supply. (Tr. 76:6-77:1, 100:8-22). Defendant Nicholas Blanck testified that he worked for Defendant Ace Restaurant Supply as a deliveryman and he “helped clean up the equipment to help my father out.” Accordingly, Plaintiff has shown that Defendants acted as an “enterprise” within the meaning of the RICO statute because they were a “group of individuals associated in fact” and they were “associated together for a common purpose of engaging in a course of conduct.” Turkette, 452 U.S. at 580, 583.
(2) Pattern of Racketeering –Continuity Not Found When Evidence of Defendant’s Past Illegal Activity Was Hearsay; does this infer sufficiency at pleading stage?
The Judge court found however that the related predicates acts did not extend over a substantial period of time, here, only three months, sufficient to satisfy closed-ended continuity.
“the clear implication of this language is that the ambit of RICO may encompass a ‘legitimate’ businessman who regularly conducts his business through illegitimate means, that is, who repeatedly defrauds those with whom he deals and, in the process, commits predicate acts, for instance by using the postal service as a means of accomplishing his scheme.” Id.
The court found that after trial Plaintiff has not presented sufficient evidence to establish the open-ended continuity prong with evidence of similar lawsuits brought against Defendants in Pennsylvania state court but the court ruled that they were inadmissible hearsay evidence. Accordingly, the court determined that when viewing the admissible evidence, the Court finds that Plaintiff has not demonstrated open-ended continuity. 18 U.S.C. § 1962(c). Although Defendant Korey Blanck committed fraud under Pennsylvania law, and Defendants committed numerous related predicate acts against Plaintiff, the admissible evidence does not support a finding that this is Defendants’ “regular way of conducting [their] ongoing legitimate business.” Tabas, 47 F.3d at 1295 (quoting H.J. Inc., 492 U.S. at 243).
Section 1962(d) makes it “unlawful for any person to conspire to violate” Section 1962(c). To establish a RICO conspiracy, the plaintiff must show “(1) that two or more persons agreed to conduct or to participate, directly or indirectly, in the conduct of an enterprise’s affairs through a pattern of racketeering activity; (2) that the defendant was a party to or member of that agreement; and (3) that the defendant joined the agreement or conspiracy knowing of its objective to conduct or participate, directly or indirectly, in the conduct of an enterprise’s affairs through a pattern of racketeering activity.” United States v. John-Baptiste, 747 F.3d 186, 207 (3d Cir. 2014). Liability under Section 1962(d) may still be found even if the defendant has not violated Section 1962(c). Smith v. Berg, 247 F.3d 532, 537 (“[T]he Supreme Court found that a violation of section 1962(c) was not a prerequisite to a violation of section 1962(d).” (citing Salinas v. United States, 522 U.S. 52, 65 (1997)).
The Court concluded that there is insufficient evidence to establish Defendants’ liability for a violation of Section 1962(d). Specifically, there is no evidence that “two or more persons agreed to conduct…an enterprise’s affairs through a pattern of racketeering activity.” John-Baptiste, 747 F.3d at 207.
The Judge maintained supplemental jurisdiction and determined the Plaintiff adequately asserted against Defendant Korey Blanck and Defendant Ace Restaurant Supply, LLC, on Plaintiff’s Counts III, IV, V, and VI, asserting state law claims of fraud, unjust enrichment, and negligent misrepresentation.
The appeals court reversed and remanded the district court’s denial of a civil RICO claim finding the plaintiffs adequately alleged proximate cause with respect to one category of damages, and that they should have been granted leave to amend their complaint with respect to at least a second category.
Harmoni (plaintiff) is the only importer of Chinese garlic with a “zero-duty rate,” meaning it does not have to pay the hefty anti-dumping duties imposed on other importers of Chinese garlic. Harmoni alleges that some of these importers, jealous of the competitive advantage Harmoni enjoys, conspired to eliminate or reduce that advantage through two separate unlawful schemes.
The first scheme involved efforts by Harmoni’s Chinese competitors to funnel imported garlic into the United States by submitting fraudulent shipping documents to U.S. customs officials in order to evade applicable anti-dumping duties. The defendants then sold that garlic in the United States at less than fair value, resulting in increased sales for them and a corresponding decrease in Harmoni’s sales.
The second scheme involves the filing of sham requests to force Harmoni to incur significant expenses defending itself during the course of the administrative review process. In addition, Harmoni alleges that its competitors used the administrative review process as a public forum for falsely accusing Harmoni of illegal and unethical business practices, such as using prison labor to produce its garlic. Harmoni asserts that, as a direct result of these false accusations, it suffered lost sales and harm to its business reputation.
On appeal, Harmoni challenge only the dismissal of its RICO claim as to four of the defendants: Robert Hume, Joey Montoya, Stanley Crawford, and Huamei Consulting Co., Inc. on the ground that Harmoni had not adequately alleged proximate cause.
Regarding scheme one, there is no proximate cause because the relationship between the defendants’ unlawful conduct and Harmoni’s alleged injury is too attenuated to support a finding of proximate cause.
Regarding (1) Harmoni has adequately alleged proximate cause with respect to the first category of damages. As to the expenses it incurred during the administrative review process, there is a “direct relation between the injury asserted and the injurious conduct alleged.” Refusing to respond to the Department of Commerce’s inquiries would have resulted in the loss of Harmoni’s zero-duty rate, thereby subjecting its imported garlic to the same prohibitively high anti-dumping duties that Harmoni’s rivals must pay. These allegations establish a direct causal link between the defendants’ allegedly wrongful conduct (filing sham requests for an administrative review) and the injury Harmoni asserts (being forced to incur expenses responding to the review triggered by the sham filings). The Court also analyzed three factors to assess when considering whether proximate cause has been shown weigh in Harmoni’s favor. See *3.
Regarding (2), lost sales attributable to the defendants’ false accusations about Harmoni’s business practices—Harmoni may be able to allege proximate cause as well, relying on Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008), explaining why a plaintiff can be injured “by reason of” acts of mail fraud. If Harmoni can prove that it lost sales as a direct result of the defendants’ predicate acts of mail and wire fraud, the proximate cause element of its RICO claim will be satisfied.
Standing: Regarding (3) -harm to Harmoni’s business reputation—that issue would need to be litigated on remand. The parties dispute whether damage to business reputation constitutes a compensable injury under RICO. Harmoni argues that harm to business reputation constitutes an injury to a “specific business or property interest” under California law and is therefore covered by RICO. See Diaz v. Gates, 420 F.3d 897, 900 (9th Cir. 2005) (en banc) (per curiam). The defendants argue that RICO precludes recovery for harm to intangible property interests and that the reputation of a business constitutes such an interest. See Oscar v. University Students Co-operative Association, 965 F.2d 783, 785–86 (9th Cir. 1992) (en banc). Because the district court has not yet addressed this issue and the parties have not adequately briefed it on appeal, we decline to resolve it here. The issue remains open for the district court to take up on remand.
Because the complaint could potentially be saved by amendment, the district court should have granted Harmoni leave to amend.
The Third Circuit affirmed the dismissal of plaintiff’s “RICO” claims. The plaintiffs asserted defendant Cavusoglu failed to pay Cevdet for goods. The District Court dismissed Cevdet’s RICO claims holding that Cevdet failed to plead a predicate pattern of racketeering activity and continuity to state a RICO claim and that Cevdet failed to plead a domestic injury as required by RICO.
The Court reviewed Cevdet’s assertion that the District Court erred in concluding that it did not suffer a domestic injury as required under RICO, 18 U.S.C. § 1964(c), and dismissing its RICO claim. RICO creates a private right of action for injuries to a person’s business or property. 18 U.S.C. § 1964(c). While “RICO applies to some foreign racketeering activity,” “[s]ection 1964(c) requires a civil RICO plaintiff to allege and prove a domestic injury to business or property and does not allow recovery for foreign injuries.” RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090, 2103, 2111 (2016).
The Court stated that RICO allows recovery for domestic injuries to both tangible and intangible property, and the Court must identify where the property is harmed. The harm to tangible property is deemed to occur where the property is located. So, a plaintiff suffers a domestic injury to tangible property “if the plaintiff’s property was located in the United States when it was stolen or harmed, even if the plaintiff himself resides abroad.” *3, citing Bascunan v. Elsaca, 874 F.3d 806, 820-21 (2d Cir. 2017).
where the injury itself arose; the location of the plaintiff’s residence or principal place of business; where any alleged services were provided; where the plaintiff received or expected to receive the benefits associated with providing such services; where any relevant business agreements were entered into and the laws binding such agreements; and the location of the activities giving rise to the underlying dispute.
No one factor is “presumptively dispositive.” Id.
The Court discussed that Cevdet describes its injury as the damage to its $1.1 million judgment against Cavusoglu caused by Defendants’ transfer of funds that shielded Cavugolu’s assets from collection by creditors like Cevdet. This judgment does not have a physical existence and is an ‘intangible asset[.]’ ” Applying the Humphrey factors, the Court concluded that Cevdet’s injury is not domestic for the purposes of § 1964(c). Although Cevdet has a judgment against Cavusoglu under United States law, Cevdet is a Turkish company with its principal place of business in Turkey, and Cevdet experiences the loss from its inability to collect on its judgment in Turkey. Because its injury is not felt in the United States, Cevdet has not suffered a domestic injury and is therefore foreclosed from stating a RICO claim, and the District Court properly dismissed it. *3.

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