Ninth Circuit Holds That Canadian Receiver Has Standing Under RICO.
On December 31, 2008, the Ninth Circuit Court of Appeals in A. Farber & Partners, Inc. v. Garber et al., 2008 WL 5427956 (C.A.9 (Cal.)), held that a Canadian receiver had standing to bring a lawsuit under RICO. A. Farber & Partners, Inc. (the “Receiver”) was appointed interim receiver over the assets of Salim Damji and Strategic Trading Systems Instant White (“STS”) by an order issued by the Ontario Superior Court of Justice. The Receiver's appointment followed a Canadian class action by a group of investors against Damji for fraud. Acting under the order, the Receiver brought this RICO action against Maynard Garber and the other defendants. The Receiver appealed the district court's order granting summary judgment on the ground that the Receiver lacked standing to bring a RICO action.
Under RICO's civil suit provision, “any 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.”18 U.S.C. § 1964(c). The Receiver alleged that the defendants violated several provisions of § 1962 as part of a large-scale money laundering scheme that involved transfers of approximately $34 million out of Canada to various straw companies and illegal gambling operations. The only issue before this court is whether the Receiver has standing under 18 U.S.C. § 1964(c) to assert these RICO claims against the defendants.
Section 7(e) of the Canadian receivership order authorizes the Receiver “to initiate, prosecute and continue the prosecution of any and all proceedings as may in its judgment be necessary or desirable to properly protect or realize upon the Property.”E.R. 8: 1464. By the terms of this section of the court's order, the Receiver is not the personal representative of Damji and does not stand in his shoes. The Receiver's power springs from its appointment to collect and preserve the Property. The “Property” is defined in the order as “all of the present and future assets, undertaking and property of [Damji and STS] and any funds, proceeds or other assets directly or indirectly related to the funds allegedly raised by [Damji and STS] as alleged in [the Canadian class action complaint].” E.R. 8: 1462-63. The Receiver’s RICO action was authorized by the Canadian receivership order and approved by the Ontario Superior Court of Justice.
The Ninth Circuit accepted the Receiver's averments that (1) the defendants participated in a conspiracy to launder funds over which the Receiver has legal control, and (2) that the Receiver suffered injury when the funds under its protection were transferred by the defendants' RICO violations. Consequently, the court held that the Receiver had sufficiently alleged that it was injured in its property by reason of a violation of section 1962 and found that the district court erred in holding that the Receiver did not have standing to bring its RICO claims under § 1964(c).
