Opinion ID: 3051091
Heading Depth: 2
Heading Rank: 3

Heading: Allegations in Plaintiff Corcel’s Complaint

Text: According to plaintiff Corcel’s complaint, defendants Ferguson and LT formed the Ferguson-LT enterprise and undertook a fraudulent scheme wherein defendants Ferguson and LT solicited and prepared false and misleading documents and repeatedly submitted those documents to the County for the express purposes of (1) obtaining defendant LT’s SBE certification and (2) winning supply contracts from the County based on the 10% SBE advantage. Similarly, according to plaintiff Corcel’s complaint, defendants AKA, Ferguson, and LT formed the AKA-Ferguson-LT enterprise and executed a fraudulent scheme by listing defendant LT as an SBE subcontractor on defendant AKA’s construction contract bids to the County even though the defendants knew that defendant LT was certified as a SBE only because of defendants LT and Ferguson’s prior fraudulent actions. According to plaintiff Corcel, the three defendants used defendant LT’s ill-gotten SBE status for the express purpose of winning a construction contract award from the County based on the 10% SBE advantage. Critically, plaintiff Corcel alleges that—if the County had not relied on the defendants’ false and fraudulent documents and actions—the County would have 13 Case: 13-13284 Date Filed: 02/07/2014 Page: 14 of 18 awarded plaintiff Corcel the supply and construction contract at issue because plaintiff Corcel was the next lowest SBE bidder. Given these allegations—which we must accept as true at this Rule 12(b)(6) stage of the litigation—we conclude that plaintiff Corcel has alleged a direct relation between its claimed injury and defendants’ federal civil RICO violations sufficient to constitute proximate causation at this pleading stage in the proceedings. See Mohawk Indus., 465 F.3d at 1287–88 (requiring “some direct relation” between the injury asserted and the injurious conduct). According to the complaint, the defendants’ scheme of knowingly misrepresenting defendant LT’s qualifications for SBE status had the purpose and direct result of channeling contracts to the defendants and away from the entity that would have received those contracts (i.e., plaintiff Corcel) if the defendants had not undertaken their fraudulent conduct. Simply put, the defendants’ alleged fraud directly caused plaintiff Corcel to lose multiple County contracts. Examination of the motivating principles behind the directness component of the proximate causation requirement in federal RICO cases bolsters this Court’s conclusion that, as alleged, there is a direct relationship between the defendants’ actions and plaintiff Corcel’s harm. See Anza, 547 U.S. at 458–60, 126 S. Ct. at 1997–98. 14 Case: 13-13284 Date Filed: 02/07/2014 Page: 15 of 18 First, as alleged, plaintiff Corcel was next in line to receive the County contracts at issue. That is, if the defendants’ alleged SBE fraud had not occurred, plaintiff Corcel would have been awarded the supply and construction contracts. Based on the allegations, there are no other factors that would have prevented plaintiff Corcel from receiving those contracts. But see id. at 459, 126 S. Ct. at 1997 (reaching different result based, in part, on the court’s determination that the plaintiff’s “lost sales could have resulted from factors other than [the defendants’] alleged acts of fraud”). Second, plaintiff Corcel’s damages should be ascertainable. For each contract that plaintiff Corcel would have won but-for the defendants’ actions, plaintiff Corcel may demonstrate with direct evidence the alleged profit that it would have made in executing the contract. At this pleading stage and given the allegations in plaintiff Corcel’s complaint, we cannot say that such damages would be wholly speculative in nature. See id. at 458–59, 126 S. Ct. at 1997–98 (considering the relative ease of ascertaining damages and the “speculative nature” of the proceedings required to maintain a federal civil RICO claim). Third, there is no appreciable risk of duplicative recoveries. See id. at 459, 126 S. Ct. at 1998 (considering “any appreciable risk of duplicative recoveries”). As alleged, plaintiff Corcel was next in line to receive each of the County contracts 15 Case: 13-13284 Date Filed: 02/07/2014 Page: 16 of 18 at issue. Consequently, no other bidder would be able to recover based on the defendants’ alleged federal RICO violations. And, the County’s possible recovery is not duplicative of plaintiff Corcel’s recovery. As alleged, the County saved money by awarding the contracts to the defendants instead of plaintiff Corcel. Plaintiff Corcel was the next lowest bidder; as such, its bids were necessarily more than the defendants’ bids. If the County had awarded the contracts to plaintiff Corcel, the County would have paid more money than it actually paid to the defendants. Consequently, there is no appreciable risk of duplicative recovery here.3 Fourth, no other immediate victims of the defendants’ alleged RICO violations are more likely to vindicate the laws by pursuing their own claims. 4 See id. at 460, 126 S. Ct. at 1998 (“The requirement of a direct causal connection is especially warranted where the immediate victims of an alleged RICO violation can be expected to vindicate the laws by pursuing their own claims.”). As a 3 We acknowledge that the prime contractor (and any possible subcontractors) who was deprived business as a result of the AKA-Ferguson-LT enterprise may seek recourse similar to that sought by plaintiff Corcel. However, in such case, any potential recovery would not be duplicative; it would simply make all of the entities wronged by the defendants’ alleged actions whole. 4 The Court notes that the prime contractor (and any possible subcontractors) on the construction contract that is the subject of the AKA-Ferguson-LT enterprise may be motivated to bring similar claims. However, based on the complaint, we cannot say that those entities are more likely to vindicate the federal RICO laws through their own, separate civil actions. 16 Case: 13-13284 Date Filed: 02/07/2014 Page: 17 of 18 preliminary matter, plaintiff Corcel was an immediate victim of the defendants’ fraud, as plaintiff Corcel was directly harmed by the defendants’ conduct. The County is also a victim—at least insofar as the defendants’ fraud undermined the purposes of the County’s SBE Program by denying the County the opportunity to award contracts to businesses that actually met its SBE requirements. Because plaintiff Corcel’s lost opportunity for profits is more direct and quantifiable than the subversion of the County’s SBE Program, plaintiff Corcel is the victim most likely to attempt to vindicate the federal civil RICO laws. 5 For all of these reasons, we conclude that plaintiff Corcel’s complaint alleges a sufficiently direct injury, especially given the factual allegations that directly correlate the defendants’ alleged fraud and plaintiff Corcel’s lost opportunity to obtain the County’s business. 5 The district court relied on a fact not present in plaintiff Corcel’s complaint: that the County paid more as a result of the defendants’ fraud and was incentivized to sue. As noted above, however, plaintiff Corcel alleged that the County paid less to the defendants than it would have paid to plaintiff Corcel as the next lowest bidder. That is, the defendants’ alleged fraud saved the County money. Once the County’s relative financial harm is clarified, the district court’s conclusions—that (1) plaintiff Corcel’s suit presents a risk of duplicative recoveries and (2) the County is better positioned to sue as the “more immediate victim” of the alleged fraud— are faulty. While evidence may not bear out this claim, at this pleading stage, we accept the allegations as true. 17 Case: 13-13284 Date Filed: 02/07/2014 Page: 18 of 18