Injuries to Business or Property - RICO § 1964(c)

Posted on June 29, 2007 by Thomas Walker

As I noted in my last post, a civil RICO plaintiff must plead and prove direct injury "by reason of" the defendant’s RICO violation. But pleading and proving direct causation may not be enough to save a plaintiff’s claim from dismissal. Section 1964(c) limits injuries to a plaintiff’s “business or property”:

Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefore . . . and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee . . . . (Emphasis added).

So, not all injuries are provided a remedy under the RICO Act. Most notably personal injuries are not compensable under RICO. As with RICO’s direct injury requirement, Courts have used the "business or property" standard as a means of promptly dismissing claims that they consider beyond the Act’s intended scope. The clear message is – Don’t bring a RICO claim in order to gain leverage in an ordinary tort case.
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RICO - More on Direct Causation

Posted on June 26, 2007 by Thomas Walker

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.”
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