Opinion ID: 785711
Heading Depth: 2
Heading Rank: 1

Heading: The RICO Standing Order

Text: 11 Wagh argues that the district court's use of the RICO Standing Order applies the heightened pleading standards prohibited by Swierkiewicz v. Sorema N.A., 534 U.S. 506, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). This is essentially a challenge to the Standing Order as being in conflict with Fed.R.Civ.P. 8(a). As far as can be determined, this court has never before ruled on the compliance of RICO standing orders with the basic pleading requirements of Rule 8(a) or the stricter pleading requirements of Rule 9(b). 12 Some district judges in at least four districts in the Ninth Circuit use RICO standing orders. Individual judges in the Northern, Central, and Southern Districts of California, and the District of Hawai'i have issued orders that direct plaintiffs claiming RICO violations to state their allegations in detail and with specificity, including a detailed description of the pattern of racketeering activity or collection of unlawful debts alleged for each RICO claim. See Gutierrez v. Givens, 1 F.Supp.2d 1077, 1087 (S.D.Cal.1998) (describing the purpose of such orders as providing notice to the defendant and the filtering out of meritless complaints); May v. U.S. Chamber of Commerce, 1996 WL 116829 (N.D.Cal.1996) (ordering the plaintiff to include a RICO statement consistent with the standing orders of the court); Lui Ciro, Inc. v. Ciro, Inc., 895 F.Supp. 1365 (D.Hawai'i, 1995) (stating that RICO plaintiffs are required, by a standing order of the court, to file a RICO case statement within 30 days of filing the complaint); In re Bank of Credit and Commerce Int'l Depositors Litig., 1992 WL 696398 (C.D.Cal.1992) (referring to the Order used in that case). 13 According to a leading treatise on civil RICO actions, [m]any federal district courts have issued standing orders in civil RICO cases requesting that plaintiff's counsel provide certain details concerning their RICO claim. DAVID B. SMITH & TERRANCE G. REED, CIVIL RICO App. 9A, 9-100.17 (March 2003) (citing 15 different district courts, in the Second, Third, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, and D.C. Circuits, as among those that issue RICO Standing Orders). Most district courts, including the district court in this case, either adopt verbatim or use a version of the standing order issued by Judge Alvin Krenzler in Lyman Steel Co. v. Shearson Lehman Bros., Inc., Civ. No. C-86-355, 1986 U.S. Dist. LEXIS 29346 (N.D.Ohio 1986). 14 Despite the widespread use of these orders, however, only three circuits have either directly or indirectly addressed the question of their compliance with notice pleading requirements. In Figueroa Ruiz v. Alegria, the First Circuit affirmed in relevant part the district court's dismissal with prejudice of RICO claims for failure to comply with its order calling for detailed explication of the factual underpinnings of the RICO claims. 896 F.2d 645, 646 (1st Cir.1990). Upholding the lower court's use of the order to compel greater specificity in the plaintiffs' complaint, the court held that the need for expeditious and orderly progress of ... litigation is particularly pronounced in a civil RICO suit because of its quasi-criminal nature and consequent stigmatizing effect on those named as defendants. Id. at 650. Courts should therefore strive to flush out frivolous RICO allegations at an early stage of the litigation. Id. The court found that the order was designed with this goal in mind, and therefore found no abuse of discretion in the district court's dismissal of the RICO claims. 2 15 The Fifth Circuit has also upheld the use of RICO standing orders at least three times. In Old Time Enterps. v. Int'l Coffee Corp., it held that the district court did not err in requiring a more specific, clear, and direct statement of the RICO claims. 862 F.2d 1213, 1217 (5th Cir.1989). Noting that the Standing Order [served the plaintiff] with notice of the requirements for pleading a RICO claim in accordance with the relevant substantive and procedural rules, id. at 1218, the court affirmed the dismissal for failure to state a claim. Id. at 1218-19. The court again rejected a challenge to a standing order as being in conflict with Rule 8(a) in Elliott v. Foufas, where it held that the order was entirely consistent with the requirements of Rule 8 that pleadings contain a plain statement of the claim and that pleadings be direct and concise. 867 F.2d 877, 880 (5th Cir.1989). In late 1990, asserting that such orders are a useful, sometimes indispensable, means to understand the nature of the claims asserted and how the allegations satisfy the RICO statute, the court wrote that [t]he propriety of a district court's requirement of a case statement to summarize the nature of RICO claims is ... well-established in this circuit. Marriott Brothers v. Gage, 911 F.2d 1105 (5th Cir. 1990). 16 The Second Circuit, however, has adopted a more cautious approach to the use of such standing RICO orders. In Commercial Cleaning Services, L.L.C. v. Colin Service Systems, Inc., the district court had dismissed the RICO claim on the alternative ground that the plaintiff had violated its standing order and therefore failed to furnish information relating to the claim. 271 F.3d 374, 385 (2d Cir. 2001). The court found that the Standing Order call[ed] for information far in excess of the essential elements of a RICO claim.... To the extent [the order] called for presentation of information going beyond what a plaintiff needs to present to establish a legally sufficient case, plaintiff's inability to produce it could not justify the grant of judgment to defendant. Id. at 386. 17 One key distinction between the First and Fifth Circuit cases on one hand, and the Second Circuit case on the other, is that the former deal with situations in which the alleged predicate offenses were mail or wire fraud, while the latter discussed an action in which the underlying offense was a violation of the Immigration and Nationality Act. As both the First and Fifth Circuits recognized, complaints alleging fraud must comply with both Fed. R.Civ.P. 8(a) and 9(b). See Figueroa Ruiz, 896 F.2d at 648 n. 3; Old Time Enterps., 862 F.2d at 1217. That is, not only must the statement of the claim show[] that the pleader is entitled to relief, Fed.R.Civ.P. 8(a)(2), but the circumstances constituting fraud ... [must] be stated with particularity. Fed R. Civ. P. 9(b). It is therefore likely that the holdings in the cases affirming the use of RICO Standing Orders were, at least in part, based on the fact that the plaintiffs had failed to plead the fraud claims in sufficient detail. 18 We find the reasoning of the Second Circuit persuasive. The use of RICO Standing Orders to compel plaintiffs to produce detailed RICO Case Statements, which are then treated by the district court as part of that party's pleadings, can in certain circumstances require far more information from plaintiffs than is required under either Rule 8(a) or 9(b) of the Federal Rules. Nevertheless, in this case, we hold that Wagh's pleadings failed to satisfy even the basic requirements of those rules, and that the dismissal for failure to state a claim was therefore correct.