Tuesday, February 2, 2010

RICO Case Decided by Supremes

Hemi Group v. City of New York, was decided by the Supreme Court with Chief Justice Roberts authoring the opinion (Scalia, Thomas, and Alito joined and Ginsburg joined in part).  A dissent was written by Justice Breyer (Stevens and Kennedy joined). Justice Sotomayor did not participate in this case. The case provides guidance on what is required to meet civil RICO's causal element. The Court states:

"The City of New York taxes the possession of cigarettes. Hemi Group, based in New Mexico, sells cigarettes online to residents of the City. Neither state nor city law requires Hemi to charge, collect, or remit the tax, and the purchasers seldom pay it on their own. Federal law, however, requires out-of-state vendors such as Hemi to submit customer information to the States into which they ship the cigarettes.

Against that backdrop, the City filed this lawsuit under the Racketeer Influenced and Corrupt Organizations Act (RICO), alleging that Hemi failed to file the required customer information with the State. That failure, the City argues, constitutes mail and wire fraud, which caused it to lose tens of millions of dollars in unrecovered cigarette taxes. Because the City cannot show that it lost the tax revenue "by reason of" the alleged RICO violation, 18 U. S. C. §1964(c), we hold that the City cannot state a claim under RICO. We therefore reverse the Court of Appeals’ decision to the contrary." (emphasis added)

The Court also stated that "[p]ut simply, Hemi’s obligation was to file the Jenkins Act reports with the State, not the City, and the City’s harm was directly caused by the customers, not Hemi. We have never before stretched the causal chain of a RICO violation so far, and we decline to do so today."

Justice Ginsburg additionally notes,  "I resist reading RICO to allow the City to end-run its lack of authority to collect tobacco taxes from Hemi Group or to reshape the "quite limited remedies" Congress has provided for violations of the Jenkins Act."

The dissent finds the "failure to provide the" state "with the names and addresses of its New York City cigarette customers proximately caused New York City to lose tobacco tax revenue."  

http://lawprofessors.typepad.com/whitecollarcrime_blog/2010/01/rico-case-decided-by-supremes.html

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