Court Opinion

ID: 6320164
Source: CourtListenerOpinion
Date Created: 2022-03-04 16:00:40.691806+00
Date Added: 2024-06-11T09:02:36.283426
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 21-2590
JOY RYDER and RHONDA LEE,
                                                Plaintiffs-Appellants,
                                 v.

DAVID HYLES, HYLES-ANDERSON COLLEGE, INC., and FIRST
BAPTIST CHURCH OF HAMMOND INDIANA, INC.,
                                   Defendants-Appellees.
                     ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
           No. 1:20-cv-01153 — Charles R. Norgle, Judge.
                     ____________________

   ARGUED FEBRUARY 16, 2022 — DECIDED MARCH 4, 2022
                ____________________

   Before RIPPLE, SCUDDER, and KIRSCH, Circuit Judges.
   SCUDDER, Circuit Judge. This case arises out of horriﬁc alle-
gations of sexual abuse and assault at the First Baptist Church
of Hammond, Indiana and its aﬃliated school, Hyles-Ander-
son College, in the late 1970s. Plaintiﬀs Joy Ryder and Rhonda
Lee both allege that David Hyles, a leader of the Church and
College, sexually assaulted them over several years, with
Hyles, the Church, and the College then conspiring to cover
2                                                   No. 21-2590

up the abuse. Decades later, in 2020, the plaintiﬀs sought to
recover for their alleged injuries by bringing a civil claim un-
der the federal Racketeer Inﬂuenced and Corrupt Organiza-
tions Act. The district court dismissed the complaint for a
pleading failure—the plaintiﬀs had not alleged the injury to
“business or property” required for RICO’s civil cause of ac-
tion. We aﬃrm.
                                I
                               A
    As the son of the Church’s founder, Hyles worked for, and
held various leadership positions in, the Church and College.
Joy Ryder and Rhonda Lee were teenagers and members of
the Church in the 1970s. Both allege that Hyles repeatedly sex-
ually assaulted them during this time. Throughout the period
of abuse, Ryder alleges that she paid tithes and oﬀerings to
the Church, as well as fees to participate in a music group and
other youth activities. For her part, Lee did not allege that she
paid money to the Church or College during this period.
    The complaint further alleges that the Church and College
knew of the wrongdoing but that both institutions and
Hyles—collectively, “the Enterprise”—“treated rape, sexual
abuse, and sexual assault as an internal matter and ‘dealt’
with these serious allegations internally,” going to “great
lengths” to prevent law enforcement from learning of the
criminal misconduct. The cover-up, the complaint continues,
included the Church and College allegedly undertaking a
sham investigation into other allegations of sexual assault at
both institutions in the 2010s.
No. 21-2590                                                       3

                                 B
    In 2020 Ryder and Lee invoked RICO’s civil cause of ac-
tion, see 18 U.S.C. §§ 1962, 1964(c), and sued Hyles, the
Church, and the College, contending that the Enterprise’s al-
leged misconduct injured their business or property.
    The defendants moved to dismiss the operative complaint
(the Second Amended Complaint) pursuant to Federal Rule
of Civil Procedure 12(b)(1), arguing that the district court
lacked subject matter jurisdiction because Ryder and Lee had
not alleged injuries to their business or property. No doubt
the defendants proceeded this way because of what we said
in Evans v. City of Chicago: the “business or property” require-
ment in § 1964(c) is “a jurisdictional requirement” akin to “a
standing requirement—rather than an element of the cause of
action—which must be satisﬁed in order to prevail on a RICO
claim.” 434 F.3d 916, 924 (7th Cir. 2006) (citations omitted).
    But Evans came before a long line of recent Supreme Court
decisions clarifying that the word “jurisdiction” (and related
considerations of Article III subject matter jurisdiction) should
be used with more precision. See Reed Elsevier, Inc. v. Much-
nick, 559 U.S. 154, 161–62 (2010) (noting that while “[c]ourts—
including this Court—have sometimes mischaracterized . . .
elements of a cause of action as jurisdictional limitations,”
“[o]ur recent cases evince a marked desire to curtail such
drive-by jurisdictional rulings”) (internal quotation and cita-
tions omitted); see also Arbaugh v. Y&H Corp., 546 U.S. 500,
511–12 (2006) (collecting examples). In this light, it is clear that
the business or property requirement is a non-jurisdictional
element of the cause of action Congress supplied in § 1964(c).
A plaintiﬀ’s failure to plead this element therefore requires
4                                                   No. 21-2590

dismissal under Rule 12(b)(6), not 12(b)(1). We modify the dis-
trict court’s judgment accordingly.
    In any event, the district court dismissed the plaintiﬀs’
complaint, concluding that they had not alleged injuries to
their business or property, as required by § 1964(c). The dis-
trict court underscored that Ryder and Lee’s primary injuries
were personal and any “pecuniary losses ﬂowing from per-
sonal injuries are insuﬃcient to confer standing for a RICO
claim.” From there the district court rejected Ryder and Lee’s
contention that they satisﬁed RICO’s injury-to-business or
property requirement by alleging that the Church used their
fees and donations to fund the Enterprise’s sham investiga-
tions—which, as both plaintiﬀs alleged, “diminished the
value of the education and activities.” The court explained
that, because Ryder and Lee had “characterize[d] these con-
tributions . . . as donations,” these payments could not “give
rise to any legal interest in exchange for them.”
    This appeal followed.
                               II
    The RICO statute makes it “unlawful for any person em-
ployed by or associated with any enterprise . . . [with an inter-
state or foreign commerce nexus] to conduct or participate,
directly or indirectly, in the conduct of such enterprise’s af-
fairs through a pattern of racketeering activity.” 18 U.S.C.
§ 1962(c). And it creates a civil cause of action, permitting
“[a]ny person injured in his business or property by reason of a
violation of section 1962” to recover treble damages, costs,
and reasonable attorney’s fees. Id. § 1964(c) (emphasis added).
   The requirement that civil RICO plaintiﬀs allege an injury
to “business or property” serves to “preclude recovery for
No. 21-2590                                                  5

personal injuries and the pecuniary losses incurred there-
from.” Doe v. Roe, 958 F.2d 763, 767 (7th Cir. 1992); see also
Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979) (“The phrase
‘business or property’ . . . would, for example, exclude per-
sonal injuries suﬀered.”). “Most personal injuries,” we have
recognized, “will entail some pecuniary consequences,” but
that does not transform them all into “business or property”
injuries. Doe, 958 F.2d at 770. Instead, when the alleged inju-
ries “are plainly derivative[]” of personal injuries, they “re-
ﬂect personal injuries which are not compensable under
RICO.” Id.; see also Evans, 434 F.3d at 927 (“Evans’ claim of
loss of employment income is nothing more than an indirect,
or secondary eﬀect, of the personal injuries that he allegedly
suﬀered . . . and therefore such a claim does not constitute a
cognizable injury to ‘business or property’ within the mean-
ing of § 1964(c).”).
    Here, the complaint focuses entirely on allegations of per-
sonal injury—horriﬁc allegations by any measure. The nature
of the alleged personal injuries does not, however, transform
them into injuries to any business or property. See Evans, 434
F.3d at 927; Doe, 958 F.2d at 770.
    Ryder and Lee disagree, claiming they have suﬀered two
injuries to identiﬁable property interests under Illinois law.
But, even assuming that Ryder and Lee possessed these
claimed property interests, their claims, as they appear in
their complaint, are too attenuated to avoid dismissal. First,
Ryder and Lee contend that they suﬀered a “deprivation from
the bargained-for access to and enjoyment of the activities
provided by the Church, School, and College that they paid
for and had a legitimate expectation to receive.” But their
complaint never explains why Hyles’s alleged misconduct
6                                                   No. 21-2590

directly caused a business or property injury. Rather, the com-
plaint alleges that Ryder and Lee suﬀered personal injuries
during the exercise of a property right (in particular, at a time
of expending money to participate in Church-related activi-
ties) that had an “indirect, or secondary eﬀect” on the value
of the property right. Evans, 434 F.3d at 927. This is insuﬃcient
to satisfy the business or property element of a civil RICO
claim. Accepting the contentions as true does nothing to
change the alleged injuries at the center of the RICO claim—
the sexual abuse inﬂicted by Hyles.
    Second, Ryder and Lee contend that the Enterprise misap-
propriated their funds by using them to fund a sham investi-
gation in the 2010s. But nowhere does their complaint de-
scribe how tithes or tuition paid in the 1970s could plausibly
have been used to fund a phony investigation decades later.
So here Ryder and Lee’s allegations are too “speculative and
amorphous” to permit their RICO claim to proceed. Id. at 932.
    Because the district court dismissed the complaint under
Rule 12(b)(1), the dismissal necessarily was without preju-
dice. See Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688, 690
(7th Cir. 2015) (citing Hernandez v. Conriv Realty Assocs., 182
F.3d 121, 122 (2d Cir. 1999)). A dismissal under Rule 12(b)(6),
in contrast, “operates as an adjudication on the merits” and is
with prejudice unless otherwise speciﬁed. Fed. R. Civ. P.
41(b); see also Remijas, 182 F.3d at 697. In the ordinary course,
“a plaintiﬀ whose original complaint has been dismissed un-
der Rule 12(b)(6) should be given at least one opportunity to
try to amend her complaint before the entire action is dis-
missed.” Runnion ex rel. Runnion v. Girl Scouts of Greater Chi-
cago & Nw. Indiana, 786 F.3d 510, 519 (7th Cir. 2015); see also
No. 21-2590                                                    7

Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave [to
amend] when justice so requires.”).
   It is diﬃcult to see how Ryder and Lee could amend their
complaint for a third time to advance plausible allegations
they suﬀered the injury to business or property required by
§ 1964(c). See Loja v. Main St. Acquisition Corp., 906 F.3d 680,
684–85 (7th Cir. 2018) (recognizing that district courts have
broad discretion to deny leave to amend when doing so
would be futile). And this observation most likely explains
why the district court ordered the case closed alongside its
dismissal order.
                        *       *      *
    What is alleged here is tragic beyond words. But we are
constrained by the limitations Congress established in
§ 1964(c). Because Ryder and Lee have not plausibly alleged
any injury to business or property within the meaning of the
statute, we are left to AFFIRM AS MODIFIED.