Court Opinion

ID: 2977195
Source: CourtListenerOpinion
Date Created: 2015-09-22 18:04:08.644219+00
Date Added: 2024-06-11T11:44:05.180097
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                                     Pursuant to Sixth Circuit Rule 206
                                             File Name: 08a0382p.06

                        UNITED STATES COURT OF APPEALS
                                         FOR THE SIXTH CIRCUIT
                                           _________________

                                                          X
 TRUCKING, INC.; GREEN RIVER SEED AND SOD, INC.; -
 CHAZ CONCRETE COMPANY, LLC; GRANT
                                                           -
                                                           -
 SWEENEY ENTERPRISES, INC.; doing business as
                                                           -
                                                               No. 07-5870
 Kentucky Transfer Line, on behalf of themselves
                                                           ,
 and a class of persons similarly situated,                 >
                                  Plaintiffs-Appellants, -
                                                           -
                                                           -
                                                           -
             v.

                                                           -
                                                           -
 JAMES C. CODELL, III, Secretary of the Kentucky
                                                           -
 Transportation Cabinet in his personal capacity; J.
 M. YOWELL, Kentucky State Highway Engineer in             -
                                                           -
                                 Defendants-Appellees. -
 his personal capacity,

                                                          N
                           Appeal from the United States District Court
                         for the Eastern District of Kentucky at Frankfort.
                        No. 03-00052—Karen K. Caldwell, District Judge.
                                           Submitted: June 3, 2008
                                   Decided and Filed: October 21, 2008
         Before: DAUGHTREY and MOORE, Circuit Judges; DUGGAN, District Judge.*
                                             _________________
                                                   COUNSEL
ON BRIEF: Steven S. Reed, Kent Wicker, REED WICKER, Louisville, Kentucky, for Appellants.
William E. Johnson, JOHNSON, TRUE & GUARNIERI, Frankfort, Kentucky, Bridget Leigh
Dunaway, TAYLOR, KELLER, DUNAWAY & TOOMS, London, Kentucky, for Appellees.
                                             _________________
                                                 OPINION
                                             _________________
       DUGGAN, District Judge. In this action, brought pursuant to the Racketeer Influenced and
Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-68, plaintiffs-appellants Chaz Concrete
Co., LLC, Grant Trucking, Inc., Green River Seed and Sod, Inc., and Sweeney Enterprises, Inc.

        *
          The Honorable Patrick J. Duggan, United States District Judge for the Eastern District of Michigan, sitting
by designation.

                                                         1
No. 07-5870             Chaz Concrete Co., et al. v. Codell, et al.                           Page 2

alleged that defendants-appellees James C. Codell and J.M. Yowell employed mail fraud, 18 U.S.C.
§ 1341, in a scheme to defraud the United States Department of Transportation’s Federal Highway
Administration of money and property by certifying non-qualifying entities for participation in
Kentucky’s Disadvantaged Business Enterprise (“DBE”) program. The district court granted
summary judgment in favor of the defendants on the plaintiffs’ RICO claims. For the reasons set
forth below, we REVERSE the judgment of the district court and REMAND for further
proceedings consistent with this opinion.
        Kentucky’s DBE program is federally-mandated and administered through the Kentucky
Transportation Cabinet’s Office of Minority Affairs (“OMA”). Like all state DBE programs,
Kentucky’s DBE program was established to ensure that minority owned and operated small
business concerns received contracts for work performed in federally-funded highway construction
projects. The plaintiffs in this case are businesses that were certified as DBEs by the OMA. During
the time period relevant to this lawsuit, the defendants were employed by the Cabinet and played
a role in the certification of and award of contracts to DBEs.
         RICO’s civil remedy provision 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 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 . . . .” 18 U.S.C. § 1964(c). One subsection of § 1962 that is
applicable in this case makes it “unlawful for any person employed by or associated with any
enterprise engaged in” activities affecting “interstate or foreign commerce . . . to conduct or
participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of
racketeering activity.” Id. § 1962(c). RICO defines “racketeering activity” as, among other acts,
any act indictable as mail fraud under 18 U.S.C. § 1341. Id. § 1961(1). The plaintiffs also alleged
a claim under subsection (d) of § 1962, which makes it unlawful to conspire to violate subsections
(a), (b), and (c) of § 1962.
        Following a remand by this Court in Chaz Construction, LLC v. Codell, 137 Fed. Appx. 735
(6th Cir. May 11, 2005), the district court granted the defendants summary judgment on the
plaintiffs’ RICO claims. In granting the defendants summary judgment, the district court applied
the then-existing precedent of this Court requiring a plaintiff asserting a civil RICO claim based on
the predicate act of mail fraud to plead and prove reliance upon a statement made by a defendant to
a plaintiff. The district court’s application of this Court’s then- existing precedent eliminated the
plaintiffs’ claims involving the majority of the alleged “schemes” at issue in this case, because the
plaintiffs had failed to either proffer evidence that the defendants made a misrepresentation to the
plaintiffs or that the plaintiffs relied on any such misrepresentation. As to the remaining “scheme”
involving the defendants’ alleged enticement of DBEs to bid on the Shawnee Expressway highway
construction project, the district court found that there was no genuine issue of material fact as to
whether the defendants knew that the alleged misrepresentation they made to the plaintiffs was false.
        After the plaintiffs brought their present appeal and after oral argument was scheduled and
later cancelled at the request of the parties, the Supreme Court issued a unanimous decision in
Bridge v. Phoenix Bond & Indemnity Company, __ U.S. __, 128 S. Ct. 2131, 170 L. Ed. 1012
(2008). In Bridge, the Supreme Court held that “a plaintiff asserting a RICO claim predicated on
mail fraud need not show, either as an element of its claim or as a prerequisite to establishing
proximate causation, that it relied on the defendant’s alleged misrepresentations.” Id. at __, 128 S.
Ct. at 2145. In so holding, the Supreme Court noted that a first-party reliance requirement finds no
support in RICO’s text. Id. at __, 128 S. Ct. 2139. Nor was the Supreme Court persuaded that
common law rules and policy require it to impose a first-party reliance requirement for civil RICO
claims predicated on mail fraud. See id. at __, 128 S. Ct. at 2139-45.
No. 07-5870             Chaz Concrete Co., et al. v. Codell, et al.                          Page 3

         Based on the Supreme Court’s ruling in Bridge, the precedent of this Court relied on by the
district court in granting summary judgment in the defendants’ favor has been overruled and is no
longer viable. Accordingly, we REVERSE the district court’s grant of summary judgment in the
defendants’ favor and REMAND the case for further proceedings consistent with Bridge. On
remand, the district court should also address the defendants’ argument that any RICO violation they
may have committed was not the proximate cause of the plaintiffs’ alleged injury or injuries, a
factually intensive inquiry that this Court is ill-equipped to resolve on the present record.