Opinion ID: 2801675
Heading Depth: 2
Heading Rank: 1

Heading: Ramirez and GRG as Plaintiffs

Text: RICO’s civil provision creates a cause of action for “any person injured in his business or property by reason of a violation” of any of the statute’s prohibited activities. 18 U.S.C. § 1964. At issue here is the injury requirement. The plaintiff’s injury must be “conclusive” and cannot be “speculative.” In re 7GRG has not briefed and has therefore waived its claim for tortious interference with an existing contract. 10 Case: 13-20753 Document: 00513046886 Page: 11 Date Filed: 05/18/2015 No. 13-20753 Taxable Mun. Bond Sec. Litig., 51 F3d 518, 523 (5th Cir. 1995). “Injury to mere expectancy interests or to an ‘intangible property interest’ is not sufficient to confer RICO standing.” Pinnacle Brands, 138 F.3d at 607 (quoting In re Taxable Mun. Bond Sec. Litig., 51 F.3d at 523). 8 The district court held that GRG’s alleged injuries were uncertain and intangible because JOC job assignments and contract renewal were at the sole discretion of HISD. “Thus,” the district court concluded, “any injury can only be the loss of an expectation interest and therefore speculative[.]” Appellants contend that they were not required to demonstrate legal entitlement to JOC assignments or job orders, but only the fact of loss. That is, although HISD could stop assigning GRG jobs and end the business relationships, it would not have done so but for the alleged corruption. The district court appears to have interpreted GRG as showing only that HISD might have continued favoring GRG. GRG is correct that a RICO plaintiff need not demonstrate legal entitlement, a point the Supreme Court made clear in Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 128 S. Ct. 2131 (2008). The plaintiffs in Bridge were “regular participants in Cook County’s tax sales[,]” in which bids often ended in a tie. Id. at 643, 128 S. Ct. at 2135. The county would then allocate the auctioned property on a rotational basis. Id. at 642, 128 S. Ct. at 2135. In order to make this process fair, each bidder was permitted only one simultaneous bid. Id. at 643, 128 S. Ct. at 2135. The plaintiffs alleged that a 8 Following Pinnacle Brands, 138 F.3d at 606, the district court referred to this as “RICO Act standing.” Although whether a legislative enactment authorizes a plaintiff to sue is sometimes referred to as “statutory standing,” courts should avoid using that term. See Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1387-88 & n.4 (2014) (“statutory standing” is a misleading label “since ‘the absence of a valid . . . cause of action does not implicate subject-matter jurisdiction’”) (quoting Verizon Md., Inc. v. Pub. Serv. Comm’n of Md., 535 U.S. 635, 642-43, 122 S. Ct. 1753, 1758 (2002)). 11 Case: 13-20753 Document: 00513046886 Page: 12 Date Filed: 05/18/2015 No. 13-20753 competing corporate bidder had arranged for false-flag bidders to channel additional allocations. Id. The Bridge plaintiffs had no legal entitlement to the subject matter of the auction. Nevertheless, the Supreme Court held that “[a]s a result of petitioners’ fraud, respondents lost valuable liens they otherwise would have been awarded.” Id. at 649, 128 S. Ct. at 2139. Because the fact of loss was certain, the plaintiffs could state a RICO claim. Although the vagueness of terms like “expectancy” may have created some confusion, the context of our cases makes clear that the test is a factual one. In Pinnacle Brands, for instance, plaintiffs complained that the random inclusion of valuable “chase” cards in packs of baseball cards constituted “illegal gambling.” 138 F.3d at 605. This court held that the plaintiffs could not show injury under RICO because they suffered no harm to a property interest; the card packs they bought were exactly what they bargained for. Id. at 607. Pinnacle Brands thus stands for the unremarkable proposition that a RICO plaintiff must demonstrate harm. The court’s rejection of “mere expectancy interests” appears to have been directed at the notion that the plaintiff was injured by not having any luck in drawing a chase card. See id. That is, damage to a plaintiff’s subjective expectations cannot form the basis of a RICO claim. Likewise, in In re Taxable Municipal Bond Securities Litigation, the plaintiff (for himself and others similarly situated) claimed that corruption in a state-authorized municipal bond program injured certain farmers and ranchers who might have applied for loans under that program. 51 F.3d at 521-22. The loans under the program were loans of last resort, unavailable to those who could obtain other credit. Id. at 522. At least some of the farmers and ranchers had pursued and secured other loans with higher interest rates, which disqualified them for loans under the bond program. Id. The court held 12 Case: 13-20753 Document: 00513046886 Page: 13 Date Filed: 05/18/2015 No. 13-20753 that the farmers and ranchers “have suffered no injury from not receiving what they were ineligible to receive.” Id. at 522. The court further held that the plaintiff had not demonstrated detrimental reliance, and that a lost opportunity to obtain a loan was too speculative. Id. at 522-523. Importantly, the plaintiff “ha[d] not alleged lost profits” or “that [the farmers and ranchers] ha[d] ever lost money as a result of the RICO scheme.” Id. at 523. GRG alleges both. Accord Tel-Instrument Elecs. Corp. v. Teledyne Indus., Inc., No. 90-1549, 1991 WL 87194 (4th Cir. May 28, 1991). 9 The rule that emerges from these cases is that loss of a legal entitlement is sufficient but not invariably necessary to sustain a RICO claim. A plaintiff need not show that the other party would have been obliged to confer a benefit, only that the other party would have conferred the benefit. That HISD retained discretion to award fewer contracts, or no contracts at all, does not prohibit GRG from demonstrating that but for corruption, it would have continued to receive awards.
The standard now clarified, it remains to determine whether GRG has marshaled competent summary judgment evidence that its business was injured. The proof covers two periods of time, differentiated by GRG’s status as a JOC contractor in 2009 and its subsequent failure to be chosen in the 2010 RFP process. The district court acknowledged that evidence of factual loss might be sufficient, but found that GRG had not met this burden with respect to the 9 Marshall cites this case for the proposition that “the denial of a government contract that plaintiff expected to receive, but for a competitor’s alleged bribery of public officials, did not give rise to a cognizable RICO injury.” What he fails to mention in his brief is that our sister court explicitly found that the plaintiff “would not have been awarded the [government] contract regardless.” Id. at . 13 Case: 13-20753 Document: 00513046886 Page: 14 Date Filed: 05/18/2015 No. 13-20753 contract renewal. GRG points to evidence that several Board members and a high-level administrator led Ramirez to believe that GRG’s contract was on the verge of renewal. As the district court noted, “[t]hese assurances [] were made before it was revealed to the HISD Board’s audit committee that the same highlevel administrator had bypassed the JOC contract procurement process unilaterally to award GRG with a contract in the first place.” GRG challenges that audit of the 2008 RFP as improperly motivated, but does not undermine the fact that the initial RFP was tainted nor does it allege that re-bidding the program was the wrong course of action. GRG also faults the District’s decision to select only four JOC vendors. Even viewed in the light most favorable to GRG, however, none of this evidence shows that GRG would have been chosen in the 2010 RFP but for corruption. Indeed, GRG’s tenth-place ranking was so low that even if HISD had selected seven vendors and eliminated the vendor defendants, GRG still would not have been selected. 10 In short, GRG has not adduced sufficient evidence to overcome summary judgment as to its nonselection in the 2010 RFP. The sudden decline in JOC assignments in 2009, however, is another matter. The District assigned GRG more work than any other contractor in the initial honeymoon period of the 2009 JOC program, and GRG won 42 of the 64 projects it “bid on” in 2009. The confluence of events in August 2009— Superintendent Saavedra’s testimony that his resignation was driven by his dispute with Marshall, RHJ’s latter-day and questionable addition to the JOC 10 After oral argument, Appellants called to our attention an internal audit HISD released on March 10, 2015. While it may be true that “this report contradicts HISD’s position in this case that their re-bid of JOC contracts cleaned up the demonstrated favoritism shown in 2008,” GRG still does not challenge the facts that the 2010 re-bid was an appropriate response, or that GRG would not have been selected. 14 Case: 13-20753 Document: 00513046886 Page: 15 Date Filed: 05/18/2015 No. 13-20753 program, the drop-off in assignments to GRG—would allow a jury to infer that undue influence on and by Marshall harmed GRG’s business. Appellees offer plausible explanations why GRG’s assignments dropped off, but none of these positively displaces the possible inference of corrupt influence. For example, vendors not alleged to have bribed Marshall continued to receive work after RHJ entered the picture. But GRG has produced evidence suggesting that Marshall’s preferred vendor RHJ was displacing GRG after Ramirez spurned Marshall. Further, Appellees’ expert noted that if GRG had continued to receive work at the same rate as it did the first two months, it would have been awarded over 100% of all JOC expenditures. But the drop off in total JOC volume may itself have been part of the alleged scheme. These are matters for the factfinder. We hold only that the evidence creates a fact issue as to the cause of the loss of GRG’s JOC assignments. Appellees urge many other grounds for affirming summary judgment on the RICO claims. “Although this court may decide a case on any ground that was presented to the trial court, we are not required to do so.” Breaux v. Dilsaver, 254 F.3d 533, 538 (5th Cir. 2001). Because the issues require consideration of a voluminous record, “we decline to decide these complex issues as they are better addressed by the district court in the first instance.” Lone Star Nat’l Bank, N.A. v. Heartland Payment Sys., Inc., 729 F.3d 421, 427 (5th Cir. 2013). 11 11By noting two particular issues that will be pertinent on remand, we do not presume to eliminate others raised by the Appellees. First, RICO claims require showing that the unlawful behavior proximately caused the plaintiff’s injuries. Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 112 S. Ct. 1311, 1317 (1992). A threat to a finding of proximate cause here may lie in HISD’s use of third-party project managers to administer its JOC assignments. The factfinder will have to determine whether GRG’s injury “flows” from the RICO violations. Khurana v. Innovative Health Care Sys., Inc., 130 F.3d 143, 150 (5th Cir. 1997), abrogated on other grounds by Beck v. Prupis, 529 U.S. 494, 120 S. Ct. 1608 (2000). Second, the permissible scope and extent of damages is also a matter for the district court to determine on remand. GRG’s expert estimates the company lost 18 jobs—JOC assignments 15 Case: 13-20753 Document: 00513046886 Page: 16 Date Filed: 05/18/2015 No. 13-20753