Opinion ID: 72909
Heading Depth: 3
Heading Rank: 1

Heading: requirements for rico standing

Text: A plaintiff may pursue an injury under the RICO statute (and thereby seek treble damages) only if his injury confers RICO standing. The standing provision of RICO provides that “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue . . . .” 18 U.S.C. § 1964(c). This Court has interpreted that provision to include a requirement that the party’s injuries be the direct result of the alleged racketeering activity. Therefore, a plaintiff has RICO standing only if his injuries were proximately caused by the RICO violation. See Pelletier v. Zweifel, 921 F.2d 1465, 1499 (11th Cir. 1991) (holding that plaintiff has RICO standing only if “his injury flowed directly from the commission of the predicate acts”). 10 In Pelletier, the plaintiff, an investor, alleged that the defendant and an associate conspired to defraud potential investors through the use of the mails by luring intended victims into buying stock in their company with illusory promises of control over the company. See id. at 1500. We held that the plaintiff had standing to bring a RICO claim because, as a target of the defendant’s alleged scheme, his injury would have been a direct result of the defendant’s substantive RICO violation. See id. Because injury to the solicited investors was the direct result of the alleged activity, such an injury would have been sufficient to confer RICO standing. The Supreme Court’s decision in Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S. Ct. 1311 (1992), is consistent with the RICO standing analysis that we have adopted. In Holmes, some broker-dealers were the targets of an unlawful stock manipulation scheme designed to render them insolvent and unable to pay their customers' claims. The Court concluded that the plaintiffs, customers of these broker-dealers, lacked RICO standing because their injury was “purely contingent on the harm suffered by the broker-dealers.” Holmes, 503 U.S. at 268, 112 S. Ct. at 1319. In other words, the plaintiffs lacked standing because the alleged RICO violation was not the “proximate” cause of their injury; there was no “direct relation between the injury asserted and the injurious conduct alleged.” Id. at 267, 112 S. Ct. at 1318. The Holmes Court explicitly noted that its causation analysis was the same one that we had set forth in Pelletier. See id. at 266 n.11, 112 S. Ct. at 1316 n.11. Under Holmes and Pelletier, a party whose injuries result “merely from the misfortunes visited upon a third person by the defendant’s acts” lacks standing to pursue a 11 claim under RICO. Holmes, 503 U.S. at 267, 112 S. Ct. at 1318. Application of that principle means that losses suffered by a company’s stakeholders as a result of racketeering activity against the company do not give them standing under RICO. RICO standing will not arise solely because one is a shareholder or a limited partner in a company that was the target of the alleged RICO violation. See, e.g., Warner v. Alexander Grant & Co., 828 F.2d 1528, 1530 (11th Cir. 1987) (“It is clear, however, that Warner cannot sue under RICO for damages he sustained derivatively as a shareholder.”). Such an injury is too indirect or “derivative” to confer RICO standing. However, a shareholder derivative lawsuit presents a scenario entirely different from the one where a shareholder sues for his own loss suffered indirectly as a result of racketeering activity against a corporation. The difference is that a shareholder's derivative suit is for the benefit of the corporation and alleges an injury that befalls the corporation directly, instead of an injury to the nominal plaintiff who institutes the suit. The cause of action arises in the corporation itself, rather than in the nominal plaintiff who brings suit, because a shareholder derivative suit is “[a]n action by a shareholder for the purpose of sustaining in his own name a right of action existing in the corporation itself, where corporation would be an appropriate plaintiff.” Black's Law Dictionary 1419 (6th ed. 1991) (emphasis added). Because the corporation stands to gain from a shareholder's derivative suit asserting a RICO claim, the shareholder bringing the derivative claim has RICO standing if the racketeering act that forms the basis of the RICO claim was directed at the corporation. See In re American Express Co. Shareholder Litigation, 39 F.3d 395, 400-01 (2d Cir. 1994) 12 (holding that in determining whether plaintiff in shareholder derivative action has RICO standing, courts must look to whether alleged activity was intended to harm corporation). Allowing shareholders to state a RICO claim on behalf of the corporation functions as an important safety valve, because otherwise executives looting a corporation would be insulated from RICO liability as a result of no one having standing to sue them.