Tuesday, November 29, 2005

Certiorari Granted In Civil RICO Case

The Supreme Court granted certiorari in Anza v. Ideal Steel Supply Corp., a Second Circuit case.  The question presented is: "Is a competitor 'injured in his business or property by reason of a violation' of the Racketeer Influenced and Corrupt Organizations Act when the alleged predicate acts of racketeering activity were mail fraud but the competitor was not a party defrauded and did not rely on the alleged fraudulent behavior?"  The case involves a scheme by one company to avoid paying sales taxes and submitting fraudulent sales tax returns, which constitutes mail fraud, in order to harm a competitor, who sued under RICO alleging that the scheme caused injury to the plaintiff's business.  The Second Circuit held that a competitor whose business is the target of the scheme has standing to sue even though the racketeering activities defrauded a third party and the harm is only indirect to the plaintiff-competitor through the mail fraud (373 F.3d 251 (2d Cir. 2004)). The Second Circuit held:

[T]he principle governing the present case is that where a complaint contains allegations of facts to show that the defendant engaged in a pattern of fraudulent conduct that is within the RICO definition of racketeering activity and that was intended to and did give the defendant a competitive advantage over the plaintiff, the complaint adequately pleads proximate cause, and the plaintiff has standing to pursue a civil RICO claim. This is so even where the scheme depended on fraudulent communications directed to and relied on by a third party rather than the plaintiff.

On Nov. 15, the Court dismissed another RICO case, Bank of China v. NBM, L.L.C. after the Bank of China moved to dismiss the case because it had won a retrial from the Second Circuit.  Anza may allow the Court to clarify the standing requirements for a RICO claim, although if past performance is any indication of future decisions, the opinion will not be particularly helpful in explaining a statute that is hardly pellucid. (ph)


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