Opinion ID: 748603
Heading Depth: 4
Heading Rank: 1

Heading: Loss of Business Opportunities and Damage to Professional

Text: 29 Reputation as a Result of Substantive RICO Violations 30 The injuries pleaded by Khurana are denigration to his professional reputation via the harmful employment associations that resulted from being fraudulently lured into his position at the hospital and the loss of foregone legitimate employment opportunities. In Sedima, the Court held that the injury relied on by a plaintiff must be the result of a § 1962 violation. 473 U.S. at 496, 105 S.Ct. at 3285. The Court explained that for standing based on a § 1962(b) or § 1962(c) violation, a valid RICO injury must necessarily stem from predicate acts that underpin the § 1962 violation. Id. at 497, 105 S.Ct. at 3285. The necessary racketeering activities are those activities catalogued in § 1961(1). Id. at 495, 105 S.Ct. at 3284. Khurana contends that the defendants caused him injury by fraudulently inducing him to accept employment via mail and wire fraud, thereby damaging his reputation through association with their fraudulent activities and depriving him of other legitimate business opportunities. 31
32 Khurana pleaded injury proximately resulting from the defendants' violations of § 1962(b) and § 1962(c) when he asserted the injury of business reputation harm. For § 1962(b) and § 1962(c) violations, the injurious conduct must be racketeering acts as listed in § 1961(1). According to Khurana's pleadings, he detrimentally relied on the appellees' misrepresentations as to the legitimacy of the hospital's operations in taking his position with the hospital. Such reliance on a predicate fraud act can indicate the necessary proximate relationship between the injury asserted and the injurious conduct. See Chisolm v. TransSo. Fin. Corp., 95 F.3d 331, 337 (4th Cir.1996) (citing cases); Standardbred, 985 F.2d at 104. In Standardbred, the defendants acquired a race track financed by municipal bonds. In the application for the bonds, the defendants stated an intent to operate the race track and assured the plaintiffs of such as well. The defendants subsequently stopped racing. The Second Circuit held that the plaintiffs had § 1964(c) standing because in the fraudulently induced belief that the racing would continue, they purchased, relocated and reconstructed capital equipment for use at the track and designed their purchases and training of horses with the intent to race them at the track. Khurana similarly relocated himself and his medical practice to this hospital, a significant financial and professional decision, allegedly as a result of the appellees' misrepresentations as to the legitimacy of the hospital's operations. 33 In addition, the damage to Khurana's professional reputation was a foreseeable result of the various racketeering acts of wire and mail fraud. See discussion supra Part II.C. Khurana, as the hospital's director, was essentially the figurehead of a fraud-ridden, now defunct institution. The act of fraudulently hiring him can be a proximate cause of any damage that his professional reputation has suffered. Damage to his professional reputation is easily seen as a natural outgrowth of such an employment association. As the predicate acts were pleaded as responsible for Khurana's acceptance of his employment with River Region, we find that the pleadings presented the claim of necessary proximate cause for Khurana's standing for this claim. See Cox v. Adm'r U.S. Steel & Carnegie, 17 F.3d 1386, 1399 (11th Cir.1994) (finding proximate cause where defendants' conduct was substantially responsible for claimed injuries); see also generally Prosser & Keeton on Torts § 41, p. 268 (discussing substantial responsibility and proximate cause). 34
35 Regarding Khurana's claimed loss of legitimate business opportunity, we begin our consideration by noting that RICO civil standing is not limited to only the immediate victim of a defendant's RICO violation. See Zervas v. Faulkner, 861 F.2d 823, 823, 833 (5th Cir.1988) (A requirement that the nexus between the injury and a predicate act be 'direct' may ... be overly restrictive.); Mid Atl. Telecom, Inc. v. Long Distance Servs., Inc., 18 F.3d 260, 263 (4th Cir.1994) (rejecting adoption of a rule that only injuries suffered by the immediate victim of a predicate act satisfy the by reason of requirement of § 1964(c)). In Mid Atlantic, a plaintiff telephone company accused one of its competitors of violating RICO by defrauding its customers with fictitious charges, enabling it to charge lower rates to entice new subscribers. The plaintiff company alleged that it lost revenues from subscribers who were defrauded into accepting the fraudulent lower rates of the defendant company. The Fourth Circuit rejected the argument that the plaintiff company lacked standing because the customers were the directly injured parties and only they were proximately injured by its alleged misconduct. Similarly, Khurana may not have been the intended target of the fraud scheme, but like the telephone company in Mid Atlantic, he pleaded the loss of a legitimate business opportunity resulting from the defendants' alleged racketeering acts. Holmes did not preclude a RICO claim for indirect injuries, but rather instructed the federal courts to employ common law proximate causation principles. See Israel Travel, 61 F.3d at 1257. Some indirect RICO injuries, such as this one, satisfy the proximate causation requirements of common law. Id. In fact, we have previously rejected a direct versus indirect injury test as the dispositive standing inquiry for civil RICO claims. See Ocean Energy II, Inc. v. Alexander & Alexander, Inc., 868 F.2d 740, 746 (5th Cir.1989); see also Reynolds v. East Dyer Dev. Co., 882 F.2d 1249 (7th Cir.1989) (avoiding using direct versus indirect terminology to make standing determinations and instead focusing on causation); Prosser & Keeton on Torts § 42, p. 273-74 (discussing direct versus indirect as only one of several theories of proximate causation). 36 In Mid Atlantic, the Fourth Circuit noted that the plaintiff was not seeking to vindicate the claims of its competitor's customers but rather its own alleged distinct and independent injuries of lost customers and lost revenues. Id. at 264. We agree with the Fourth Circuit that distinct and independent injuries are in keeping with the Supreme Court's understanding of proximate cause in Holmes. Khurana pleads his own injury of loss of legitimate employment opportunity. In Holmes, an intervening event, the insolvency of the securities brokership, broke the causal link between the plaintiff's injury and the defendant's conduct, 503 U.S. at 262, 264, 112 S.Ct. at 1314-16 so that the plaintiff was a secondary victim. Id. at 273, 112 S.Ct. at 1320. In contrast, the plaintiff in this case seeks to recover for losses substantially attributable to the defendants' conduct. 37 Finally, as explained before, the fact that Khurana pleaded reliance on the defendants' racketeering acts as a cause of this injury indicates a valid claim that the racketeering acts proximately caused him to forego other legitimate business opportunities. See Chisolm, 95 F.3d at 337; Standardbred, 985 F.2d 102. Khurana claims that he was fraudulently induced to take his position with the hospital and argues that such proximately caused him to lose other legitimate business opportunities. As Khurana's loss of other employment opportunities was foreseeable by the defendants and could certainly be anticipated as a natural consequence of their alleged misrepresentations, Khurana has sufficiently pleaded that the alleged substantive violations of § 1962(b) and § 1962(c) proximately caused his business opportunity loss. See Chisolm, 95 F.3d at 337 (relying on plaintiff's detrimental reliance on defendants' material misrepresentations to find proximate cause and noting that [i]n order for the scheme to succeed, the appellants needed to be convinced that the 'private sales' referenced in the TransSouth notices were legitimate.... concealment of the nature of the 'private sales' was the very linchpin of the scheme.); cf. Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162, 1170 (3d Cir.1989) (affirming the dismissal of a RICO claim based on a loss of the plaintiff's former job where there was no allegation that the employer reneged or the plaintiff was duped out of her old job).