Opinion ID: 3059146
Heading Depth: 3
Heading Rank: 2

Heading: Dismissal of the Civil RICO Claim

Text: The district court dismissed Southeast’s civil RICO claim after finding that 17 Southeast failed to sufficiently allege a direct relationship between its payment for Trasylol and Bayer’s alleged fraudulent concealment. On appeal, Southeast argues that the causal chain is “simple, direct and uninterrupted.” The federal RICO laws provide civil and criminal liability for persons engaged in a pattern of racketeering activity. See 18 U.S.C. §§ 1962-1964. To state a claim for a RICO violation, a plaintiff must allege: “(1) a violation of section 1962; (2) injury to business or property; and (3) that the violation caused the injury.” Avirgan v. Hull, 932 F.2d 1572, 1577 (11th Cir. 1991) (citing O’Malley v. O’Neill, 887 F.2d 1557, 1561 (11th Cir. 1989)). In order to adequately plead the first element, a violation of § 1962, a plaintiff must allege: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.”3 Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1282 (11th Cir. 2006) (quotation omitted). Civil RICO plaintiffs “must also satisfy the requirements of 18 U.S.C. § 1964(c).” Williams, 465 F.3d at 1282. Section 1964(c) provides that “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor.” 18 U.S.C. § 1964(c) (emphasis added). To establish the “by reason of” element of § 1964(c), a plaintiff must demonstrate that the defendant’s 3 The alleged racketeering activity here was mail and wire fraud. See 18 U.S.C. § 1961(1)(B). 18 violation was not only the “but for” cause of the plaintiff’s injury but also its proximate cause. Holmes v. Sec. Investor Protection Corp., 503 U.S. 258, 268 (1992); Williams, 465 F.3d at 1287. “When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff’s injuries.” Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461 (2006). In Holmes, the Supreme Court discussed three specific factors for courts to consider in evaluating the directness between an alleged injury and the injurious conduct as follows: First, the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff’s damages attributable to the violation, as distinct from other, independent, factors. Second, quite apart from problems of proving factual causation, recognizing claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries. And, finally, the need to grapple with these problems is simply unjustified by the general interest in deterring injurious conduct, since directly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely. 503 U.S. at 269-70 (citations omitted). In the present case, the district court conducted a thorough analysis of Southeast’s civil RICO allegations and found that the factors described in Holmes weighed heavily against a finding of proximate causation. The first Holmes factor 19 was found to be the most problematic to Southeast’s claims because, although Southeast alleged that it had an independent choice of whether or not to pay for Trasylol, Southeast failed to explain how or why it made the choice to pay for Trasylol and how or why Bayer’s alleged concealment of the dangers of Trasylol led Southeast to pay for Trasylol. On appeal, Southeast continues to assert that it would never have incurred the expense of Trasylol if Bayer had been honest about Trasylol’s safety and efficacy, arguing that, taken together, (1) the plan documentation stating that Southeast would only pay for “medically necessary” expenses and (2) the FDA’s pronouncement that it could not identify any specific patient population for whom the benefits of using Trasylol outweighed the safety risks, establish a direct injury to Southeast. Yet, despite being provided with several opportunities, Southeast failed to allege facts plausibly demonstrating that Southeast would have independently determined4 that Trasylol was not “medically necessary” if Bayer had disclosed the allegedly suppressed material information. In the absence of such factual allegations, it cannot reasonably be inferred that Bayer’s allegedly fraudulent conduct led directly to Southeast’s decision to pay for Trasylol. Consequently, the complaint fails to meet 4 As with its NJCFA claim, Southeast may not rely on a fraud-on-the-market or fraud-onthe-FDA theory of causation for its RICO claim. 20 the direct relation requirement, and the district court properly dismissed Southeast’s civil RICO claim.5