Opinion ID: 788180
Heading Depth: 1
Heading Rank: 3

Heading: A. RICO Standing

Text: 23 To have standing to bring a civil RICO claim, a plaintiff must have suffered injury by reason of a RICO violation. 18 U.S.C. § 1964(c) (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 suit, including a reasonable attorney's fee . . . .). The phrase by reason of as used in § 1964(c) means causation under the traditional tort requirements of proximate or legal causation, as opposed to mere factual or `but for' causation. Bieter Co. v. Blomquist, 987 F.2d 1319, 1325 (8th Cir.1993); see also Newton v. Tyson Foods, Inc., 207 F.3d 444, 446-47 (8th Cir.2000) (Plaintiffs have standing in a civil RICO case only if the RICO violations both factually and proximately caused injury to the plaintiffs' business or property.). Further, a showing of injury requires proof of concrete financial loss, and not mere injury to a valuable intangible property interest. Steele v. Hosp. Corp. of Am., 36 F.3d 69, 70 (9th Cir.1994) (internal citations and quotation marks omitted); see also Price v. Pinnacle Brands, Inc., 138 F.3d 602, 607 (5th Cir.1998) (Injury to mere expectancy interests or to an `intangible property interest' is not sufficient to confer RICO standing.) (quoting Anderson v. Kutak (In re Taxable Mun. Bond Sec. Litig.), 51 F.3d 518, 523 (5th Cir.1995)). 24 Taking the facts in a light most favorable to Regions Bank, we must assume that Steven Jones, perhaps with the assistance of his accountant, Edward Bonner, committed fraud in the procurement of the $400,000 loan from Regions Bank. Regions Bank's own failure to adequately research the status of prior liens against J.R. Oil's assets, coupled with this presumed fraud, clearly caused injury to Regions Bank, both factually and proximately. Further, the $400,000 that Regions Bank actually gave to J.R. Oil under the loan cannot be viewed as an intangible property interest. 25 This tangible injury to Regions Bank was complete, however, when Regions Bank funded the loan. Nothing that occurred subsequent to the funding of the loan proximately caused any harm to Regions Bank. It is undisputed that other parties' security interests fully encumbered the collateral that J.R. Oil and Steven Jones pledged to Regions Bank. It is also undisputed that J.R. Oil did not hold assets sufficient to satisfy the debt owed to the priority lienholders, EMAC and LaSalle, much less assets sufficient to satisfy any claims of unsecured creditors, or undersecured creditors second in line to EMAC and LaSalle. Accordingly, nothing that Steven Jones, Marcella Jones, Larry Taylor, Walcott, or Northchase did in the course of the alleged RICO scheme of bankruptcy irregularities and corporate shell games worsened Regions Bank's position. 26 Importantly, Regions Bank set forth no evidence, by affidavit or otherwise, to support an inference that the isolated allegation of fraud in the loan application process was related to the alleged RICO enterprise. Regions Bank alleged a RICO enterprise of purported bankruptcy abuses and corporate maneuvering undertaken by Steven, Marcella and Kelly Jones, Larry Taylor, Walcott, and Northchase. However, Regions Bank granted and funded the loan based on representations that Steven Jones made on behalf of himself, J.R. Oil, and Jones Realty, and based on financial reports that accountant Edward Bonner prepared regarding Steven and Marcella Jones, J.R. Oil, and Jones Realty. No evidence suggests that the other alleged members of the RICO enterprise had anything to do with the loan from Regions Bank, or that any activities related to the pre-bankruptcy planning or bankruptcy-related transactions contributed to Steven Jones's and J.R. Oil's indebtedness to Regions Bank (or their indebtedness to any of the other lenders affected by the J.R. Oil bankruptcy). 27 The facts that might support a connection between the Regions Bank loan and the subsequent bankruptcy-related activities provide only a basis for speculation. These facts are: (1) the close proximity in time between the loan application and the bankruptcy filing; (2) Larry Taylor's admission that he spoke with Steven Jones regarding Steven Jones's financial problems in the spring of 2000; and (3) the fact that Marcella Jones is married to Steven Jones and that Kelly Jones is his son. These facts, however, are insufficient for a reasonable jury to conclude that a RICO enterprise existed at the time of the loan application, or that the alleged RICO enterprise had anything to do with the loan from Regions Bank. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (stating it is the judge's function to determine whether there is a genuine issue for trial[,] and that [i]f the evidence is merely colorable or is not significantly probative, summary judgment may be granted (internal citations omitted)). 28 Turning, then, to allegations concerning the RICO enterprise, Regions Bank claims, in essence, three possible sources of harm 3 : (1) J.R. Oil's possibly wrongful transfer of assets to JTM in the summer of 2000 when J.R. Oil declared bankruptcy; (2) JTM's possibly wrongful payment of proceeds from those assets to Steven and Marcella Jones or Larry Taylor when operating the Cameron truck stop after J.R. Oil filed bankruptcy; or (3) J.R. Oil's or JTM's possibly wrongful transfer of assets to Jones Realty before Jones Realty sold those assets under the authority of the bankruptcy court in January of 2002. Any potential RICO violations surrounding the bankruptcy and corporate reshuffling caused harm, if any, to the only parties who held valuable rights to recovery in the J.R. Oil bankruptcy, namely the priority lienholders. Regions Bank, as a secondary lienholder in a bankruptcy where the priority lienholders held complete claims over the only assets, has no RICO standing to contest the alleged irregularities. Simply put, analysis of proximate causation requires identification of actual, not hypothetical harm, and any impact of the bankruptcy proceedings on Regions Bank interest was purely hypothetical since the security interest and the right to repayment from J.R. Oil were without value from their inception. Newton, 207 F.3d at 447 (denying RICO standing for lack of proximate causation where injury was too attenuated); Hamm v. Rhone-Poulenc Rorer Pharm., Inc., 187 F.3d 941, 952 (8th Cir.1999) (denying RICO standing to the employee-plaintiffs of a pharmaceutical company where they were not the intended targets of the alleged racketeering activity directed towards hospitals and physicians); In re Taxable Muni. Bond Sec. Litig., 51 F.3d at 522 (stating in the context of RICO standing that [a plaintiff's] contention that he has sustained a lost `opportunity' to obtain a [state-subsidized] loan by itself is too speculative to constitute an injury). 29 Finally, even if the alleged bankruptcy irregularities and misappropriation of assets had harmed Regions Bank's position as a bankruptcy creditor, that harm would have been harm to Regions Bank's secondary security interest or contractual right to repayment under the $400,000 note. Injury to these intangible property interests is not injury that may support standing to bring RICO claims. See Price, 138 F.3d at 607 (Injury to mere expectancy interests or to an `intangible property interest' is not sufficient to confer RICO standing.); Steele, 36 F.3d at 71 (holding that patients lacked standing to bring RICO claims for allegedly fraudulent health care billings where insurance companies rather than patients suffered the actual financial harm from the alleged RICO violations); Berg v. First State Ins. Co., 915 F.2d 460, 464 (9th Cir.1990) (denying RICO standing where there was no showing of actual financial loss caused by alleged RICO violations, but rather, plaintiffs alleged merely an injury related to the loss of certain insurance policies based on both the protection [the policies] afforded against potential financial loss in the future and the present peace of mind that flows from such protection) (alteration in original). 30 In summary Regions Bank lacks RICO standing because it suffered no injury to a tangible interest by reason of RICO violation. Although Regions Bank suffered an injury to a tangible property interest, that injury was not by reason of a RICO violation, rather, it was by reason of alleged bank fraud not shown to be related to the alleged enterprise. Further, no alleged RICO violation proximately caused an injury to Regions Bank because the intangible property interest that Regions Bank possessed at the time of the alleged RICO violations was without value from its inception. Finally, even if the alleged RICO violations had caused an injury to Regions Bank, the only interest Regions Bank possessed at the time of the alleged RICO violations was an intangible property interest, injury to which cannot support a RICO claim.