Opinion ID: 772567
Heading Depth: 3
Heading Rank: 2

Heading: The Vacated $1.6 Million Award

Text: 233 In their cross-appeal, the plaintiffs assert that the District Court erred in its determination that there [wa]s simply insufficient credible evidence of any kind of damages directly flowing from the predicate acts that the jury found, other than those found in the separate interrogatories regarding damages for those predicate acts to support the additional $1.6 million award. (JA:880). The plaintiffs claim that the jury's verdict as to enterprise damages was supportable by the record below and, as such, should not have been reversed by the trial court. Brief of Plaintiffs-Appellees-Cross-Appellants at 45. 234 The plaintiffs point to the following testimony of DeFalco, which they claim sets forth a reasonable basis for a finding of proximate cause with respect to the $1.6 million award: 235 Q: From the day that you refused to give Mr. Bernas the gravel pit to today, Mr. DeFalco, have you been able to proceed with the project? 236 A: The project has been closed. 237 Q: Have you received - Since the day you refused to give Mr. Bernas the gravel pit, have you received a single approval or permit from the Town of Delaware? 238 A: No, sir. 239 Q: Have you made a single dime from Phases 2, 3 or 4 since then? 240 A: No, sir. 241 Q: Were it not for the actions of Mr. Bernas, Mr. Dirie, Mr. Rouis and the others that you described during your testimony, would you have completed the Top of the World Project? 242 A: I think Top of the World could have been sold out in one year if it had been done. 243 Brief of Plaintiffs-Appellees-Cross-Appellants at 46 (citing (T2:245)). The plaintiffs also argue: 244 DeFalco testified... that Phase I of the plaintiff's [sic] development (which sold out virtually overnight) made very little profit because of the cost of acquisition of the property, the erection of a sales office, putting up electric poles, etc., and that (because all of those costs had already been incurred) the sale of lots in Phase II would be pure profit. (T2:218-19). Since there would have been 50 available lots in Phase II (T2:219), and since each lot was selling for between $40,000 and $60,000 per lot (T2:218), the plaintiffs would have received profits of between $2 million and $3,000,000. Thus, the jury's determination of $1,600,000 (exactly 20% less than the lower profit figure) is clearly supportable. 245 Brief of Plaintiffs-Appellees-Cross-Appellants at 47 (footnotes omitted). 246 The private right of action provision of RICO provides that: 247 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 the suit, including a reasonable attorney's fee. 248 18 U.S.C. § 1964(c). 'The phrase by reason of requires that there be a causal connection between the prohibited conduct and [the] plaintiff's injury.' County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1311 (2d Cir. 1990) (quoting Norman v. Niagara Mohawk Power Corp., 873 F.2d 634, 636 (2d Cir. 1989)). To show that an injury resulted by reason of the defendant's action, a plaintiff must show 'that the defendant's violations were a proximate cause of the plaintiff's injury, i.e., that there was a direct relationship between the plaintiff's injury and the defendant's injurious conduct.' First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 769 (2d Cir. 1994) (quoting Standardbred Owners Ass'n v. Roosevelt Raceway Assocs., L.P., 985 F.2d 102, 104 (2d Cir. 1993)); see also Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268 (section 1964(c) requires plaintiff to establish proximate cause). This requires a showing not only that the defendant's alleged RICO violation was the 'but-for' or cause-in-fact of his injury, but also that the violation was the legal or proximate cause. First Nationwide Bank, 27 F.3d at 769 (citing Holmes, 503 U.S. at 265-69; Standardbred Owners, 985 F.2d at 104; Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23 (2d Cir. 1990)). In other words, a plaintiff's injury must be both factually and proximately caused by a defendant's violation of section 1962. See, e.g., In re American Express Co. Shareholder Litigation, 39 F.3d 395, 399 (2d Cir. 1994) (plaintiff's injuries must be both factually and proximately caused by the alleged RICO violation); Hecht, 897 F.2d at 23 (By itself, factual causation (e.g., 'cause in fact' or 'but for' causation) is not sufficient); Sperber v. Boesky, 849 F.2d 60, 63 (2d Cir. 1988) (RICO liability should not extend as far as factual causation.). 249 Even assuming arguendo that a plaintiff may recover for injuries caused by the operation of a RICO enterprise, in addition to injuries caused by discrete unlawful predicate acts, we see no error in the District Court's ruling that the plaintiffs failed to prove that the defendants' conduct caused the losses they claimed with respect to subsequent phases of the development project. The plaintiffs failed to satisfy the proximate cause requirement with respect to those claimed damages, because there was insufficient evidence that the plaintiffs would have been able to sell the Phase II lots even in the absence of the defendants' wrongful conduct. Phase II was conditionally approved pending work that still needed to be done on the roads. The record does not permit a reasonable jury to find that plaintiffs' inability to sell the Phase II lots substantially resulted from their inability to obtain further permits and approvals from the Town. DeFalco's mere belief that the plaintiffs would have completed the Top of the World project were it not for the defendants' actions is not sufficient. 250 To prove proximate causation, the plaintiffs would have had to offer evidence that they were otherwise entitled to approval of Phase II and that no independent, intervening factors affected their ability to sell the lots. [T]he less direct an injury is, the more difficult it becomes to ascertain the amount of the plaintiff's damages attributable to the violation, as distinct from other, independent factors. Holmes, 503 U.S. at 269. The key reasons for requiring direct causation include avoiding unworkable difficulties in ascertaining what amount of the plaintiff's injury was caused by the defendant's wrongful action as opposed to other external factors, and in apportioning damages between causes. First Nationwide Bank, 27 F.3d at 770. As this Court stated in First Nationwide Bank: 251 [W]hen the plaintiff's loss coincides with a marketwide phenomenon causing comparable losses to other investors, the prospect that the plaintiff's loss was caused by the fraud decreases.... [The plaintiff's] loss, coupled with the concurrence of that loss with the real estate market crash, is additional support for the conclusion that the fraud was not a substantial cause of [the plaintiff's] injury. 252 Id. at 772. Thus, even were we to accept the plaintiffs' enterprise damages theory, under this Court's RICO precedents, the causal link between the plaintiffs' evidence and the inability to sell the Phase II lots is too weak to satisfy the proximate causation requirement. Thus, the District Court was correct in vacating the $1.6 million award. 253