Opinion ID: 2981863
Heading Depth: 2
Heading Rank: 2

Heading: Plaintiff’s Pleading of RICO Standing

Text: We review de novo the district court’s denial of a motion for judgment as a matter of law. Jackson v. FedEx Corp. Servs., Inc., 518 F.3d 388, 391–92 (6th Cir. 2008). Applying the same deferential standard as the district court, we will reverse the lower court only if “a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.”2 Fed. R. Civ. P. 50(a). That is, “when viewed in the light of those inferences most favorable to the nonmovant, there is either complete absence of proof on the issues or no controverted issues of fact upon which reasonable persons could differ.” Spengler v. Worthington Cylinders, 615 F.3d 481, 488–89 (6th Cir. 2010) (citation and internal quotation marks omitted). Where the review of the merits arises 2 Because our review of a Rule 59 motion for a new trial on reasonableness grounds is substantially similar yet more deferential, Balsley v. LFP, Inc., 691 F.3d 747, 761 (6th Cir. 2012), we rely on our analysis above if the Ross Defendants cannot prevail on Rule 50(b) grounds. Additionally, the standard for a directed verdict under Tennessee law is also substantially the same as the federal standard. Culver v. CCL Label, Inc., 455 F. App’x 625, 627 n.2 (6th Cir. 2012). 15 Nos. 12-5739/12-6042/12-6230 from a default judgment, the question becomes whether the complaint sufficiently pleaded facts to establish liability. See Gen. Conference Corp. of Seventh-Day Adventists v. McGill, 617 F.3d 402, 406 (6th Cir. 2010). We find, as the district court did, that Plaintiff sufficiently pleaded RICO standing for the jury’s award of damages.
In order to establish RICO standing, a plaintiff must show (1) a violation of § 1962, (2) an injury to his business or property, and (3) that his injury was proximately caused by the RICO violation. Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268–69 (1992); see also 18 U.S.C. § 1964(c). The Ross Defendants argue that Plaintiff has failed to establish the third prong, which requires a plaintiff to show that he suffered a direct injury as opposed to a remote “harm flowing merely from the misfortunes visited upon a third person” or entity. Holmes, 503 U.S. at 268; accord Perry v. Am. Tobacco Co., Inc., 324 F.3d 845, 848 (6th Cir. 2003). The misfortune suffered by a shareholder—i.e., diminution in corporate assets and depleted share values—when a company falls victim to RICO violations is typically too remote to confer RICO standing on that shareholder. See e.g., Sanders Confectionery Prods., Inc. v. Heller Fin., Inc., 973 F.2d 474, 487 (6th Cir. 1992); Warren v. Mfrs. Nat’l Bank, 759 F.2d 542, 544 (6th Cir. 1985). Defendants contend that Plaintiff was merely a partner in Tellico who suffered injuries only derivative of Tellico’s losses.
Although Plaintiff pleaded that, by virtue of the predicate acts, Tellico’s value was depleted, he also pleaded a direct injury. Separate and apart from just depleted value in investment, Plaintiff established that Ross used Tellico as his alter ego to further the Ross Defendants’ criminal enterprise 16 Nos. 12-5739/12-6042/12-6230 of materially misrepresenting and artificially inflating property values and caused Plaintiff to unknowingly contribute capital and resources to the enterprise’s scheme, resulting in the misappropriation of Plaintiff’s funds and profits. State law may be used to confer RICO standing on an otherwise improper plaintiff. See Whalen v. Carter, 954 F.2d 1087, 1093 (5th Cir. 1992) (applying state law exception to bar on derivative suits to confer RICO standing on limited partner). Under Tennessee law, the corporate entity is generally disregarded particularly where the “separate corporate entity ‘is a sham or a dummy’” or where “necessary to accomplish justice.” CAO Holdings, Inc. v. Trost, 333 S.W.3d 73, 88–89 (Tenn. 2010) (citation omitted). Plaintiff’s first amended complaint established that Tellico was Ross’s alter ego, and as such, the entity was a nullity; there was no basis for bringing a suit on its behalf. Cf. Gagan v. Am. Cablevision, Inc., 77 F.3d 951, 960 (7th Cir. 1996) (finding limited partner established RICO standing where the partnership was dissolved). Moreover, if Tellico was joined, as the Ross Defendants suggest, Ross would effectively be expected to “vindicate the law” against himself and could potentially be apportioned an award of damages against himself. See Holmes, 503 U.S. at 269–70. Such an outcome would be untenable. In sum, Plaintiff sufficiently pleaded that he, independent of Tellico, was injured by the conspiracy. The district court properly denied the post-trial motions for judgment as a matter of law and a new trial.