RICO - More on Direct Causation
Pleading and proving the specialized direct cause of injury requirement under the RICO Act is just one of many important challenges confronting plaintiffs who want to take advantage of the powerful impact a RICO claim almost always has on a defendant.
RICO’s provision for civil actions reads 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). [Emphasis added.]
Unlike proximate cause in a tort case, which exists whenever a plaintiff’s injury is a reasonably foreseeable consequence of the defendant’s tortuous conduct, RICO’s “by reason of” language makes proximate cause a matter of law. Consequently, unless properly pled, a plaintiff will find himself on the short end of a motion to dismiss and/or motion for summary judgment based on lack of causation.
In Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268 (1992), the United States Supreme Court expressly held that section 1964(c)’s language limiting civil claims to plaintiffs injured “by reason of a violation of section 1962” required civil plaintiffs to prove that their damages were “proximately caused” by the RICO violation. Thus, the plaintiff must plead and prove direct injury – meaning that no other causes could intervene between the defendant’s RICO violation and the plaintiff’s injury. As pointed out by RICO Act commentator, Jeff Grell, in Holmes, “. . . the Supreme Court encouraged lower courts to use ‘proximate cause’ as a sword to attack the abusive practice of bringing RICO claims whenever mail or wire fraud arguably occurs.”