Opinion ID: 669116
Heading Depth: 2
Heading Rank: 1

Heading: Dismissal of Count I: Sec. 1962(a)

Text: Section 1962(a) of RICO provides in part: 15 It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity ... to use or invest, directly or indirectly, any part of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. 16 18 U.S.C. Sec. 1962(a). 17 This Court has held that in order to state a claim under Sec. 1962(a), a plaintiff must plead a specific injury to the plaintiff caused by the investment of income into the racketeering enterprise, distinct from any injuries caused by the predicate acts of racketeering. Craighead v. E.F. Hutton & Co., Inc., 899 F.2d 485, 494 (6th Cir.1990) (dismissing Sec. 1962(a) claim when plaintiffs alleged only injuries traceable to the alleged predicate acts). This Circuit's pleading requirement of a so-called investment injury is consistent with the holdings in all but one of the circuits which have addressed the question. See Ouaknine v. MacFarlane, 897 F.2d 75, 82 (2d Cir.1990); Glessner v. Kenny, 952 F.2d 702, 708-10 (3d Cir.1991); Parker & Parsley Petroleum v. Dresser Indus., 972 F.2d 580, 584 (5th Cir.1992); Nugget Hydroelec. L.P. v. Pacific Gas & Elec. Co., 981 F.2d 429, 437-38 (9th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 2336, 124 L.Ed.2d 247 (1993); Grider v. Texas Oil & Gas Corp., 868 F.2d 1147 (10th Cir.), cert. denied, 493 U.S. 820, 110 S.Ct. 76, 107 L.Ed.2d 43 (1989); Danielson v. Burnside-Ott Training Ctr., 941 F.2d 1220, 1239-40 (D.C.Cir.1991); but see Busby v. Crown Supply, Inc., 896 F.2d 833, 836-40 (4th Cir.1990). 18 Here, Vemco did allege reinvestment of racketeering proceeds:[Defendants] received income derived directly ... and ... indirectly in the form of wages and, possibly other means, ... from a pattern of racketeering activity as detailed above. 19 Upon information and belief this income was used, directly or indirectly, in the operation of the enterprise [described above]. 20 Amended Complaint pp 72-73. Nowhere in the amended complaint, however, did Vemco allege an injury stemming from the investment, distinct from injuries stemming from predicate acts. In fact, in a section of the amended complaint entitled Injuries to Plaintiff, Vemco specifically alleged only a list of damages it suffered [a]s a result of the Predicate Acts herein alleged which were part of a pattern of racketeering activity.... Amended Complaint p 68. Such allegations do not meet this Circuit's requirement of a distinct investment injury. 21 Vemco's reliance on this Court's opinion in Newmyer v. Philatelic Leasing, Ltd., 888 F.2d 385 (6th Cir.1989), is misplaced. In Newmyer, this Court held that a district court had improperly dismissed for lack of an investment injury a Sec. 1962(a) claim involving an investment plan. The district court had reasoned that the plaintiffs could not be injured by what the defendants did with the plaintiffs' money after they gave it up. We disagreed, noting that the Newmyer plaintiffs could have been injured by the investment itself if the investment plan into which they put their money (i.e., the enterprise) was itself funded with monies from prior racketeering against prior victims. This Court thus reversed the dismissal of the complaint, since an injury resulting from the investment of racketeering proceeds itself was possible. 22 Newmyer is distinguishable from the case at hand. Unlike the plaintiffs in Newmyer, Vemco does not allege that Flakt itself was built with racketeering proceeds amassed from others prior to Vemco's association with Flakt. Such an allegation would make Vemco's claim against Flakt analogous to that against the investment plan in Newmyer. Rather, Vemco alleges that the income Flakt derived from its racketeering against Vemco was subsequently used to operate the enterprise. Vemco never alleges that the reinvestment into the enterprise resulted in an injury separate from the predicate acts injuries. 23 The district court properly concluded that Vemco failed to plead an investment injury to state a claim under Sec. 1962(a). Therefore, we affirm the district court's dismissal of Count I of the amended complaint.