Competitor Standing Under RICO

 Summary :  A  competitor is damaged by unlawful conduct.  Can it sue.  Anza v. Ideal Supply sets forth the standard for competitor standing.

JUSTICE KENNEDY delivered the opinion of the Court.

Anza v. Ideal Supply, 547 U.S. 451 (2006)

The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U. S. C. §§ 1961-1968 (2000 ed. and Supp. III), prohibits certain conduct involving a “pattern of racketeering activity.” § 1962 (2000 ed.). One of RICO’s enforcement mechanisms is a private right of action, available to “[a]ny person injured in his business or property by reason of a violation” of RICO’s substantive restrictions. § 1964(c) 

In Holmes v. Securities Investor Protection Corporation, 503 U. S. 258, 268 (1992), this Court held that a plaintiff may sue under § 1964(c) only if the alleged RICO violation was the proximate cause of the plaintiff’s injury. The instant case requires us to apply the principles discussed in Holmes to a dispute between two competing businesses.

I 

Because this case arises from a motion to dismiss, we accept as true the factual allegations in the amended complaint. See Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U. S. 163, 164 (1993). 

Respondent Ideal Steel Supply Corporation (Ideal) sells steel mill products along with related supplies and services. It operates two store locations in New York, one in Queens and the other in the Bronx. Petitioner National Steel Supply, Inc. (National), owned by petitioners Joseph and Vincent Anza, is Ideal’s principal competitor. National offers a similar array of products and services, and it, too, operates one store in Queens and one in the Bronx.

 deal sued petitioners in the United States District Court for the Southern District of New York. It claimed petitioners were engaged in an unlawful racketeering scheme aimed at “gain[ing] sales and market share at Ideal’s expense.” App. 7. According to Ideal, National adopted a practice of failing to charge the requisite New York sales tax to cashpaying customers, even when conducting transactions that were not exempt from sales tax under state law. This practice allowed National to reduce its prices without affecting its profit margin. Petitioners allegedly submitted fraudulent tax returns to the New York State Department of Taxation and Finance in an effort to conceal their conduct.

 

Ideal’s amended complaint contains, as relevant here, two RICO claims. The claims assert that petitioners, by submitting the fraudulent tax returns, committed various acts of mail fraud (when they sent the returns by mail) and wire fraud (when they sent them electronically). See 18 U. S. C. §§ 1341, 1343 (2000 ed., Supp. III). Mail fraud and wire fraud are forms of “racketeering activity” for purposes of RICO. § 1961(1)(B). Petitioners’ conduct allegedly constituted a “pattern of racketeering activity,” see § 1961(5) (2000 ed.), because the fraudulent returns were submitted on an ongoing and regular basis.

Ideal asserts in its first cause of action that Joseph and Vincent Anza violated § 1962(c), which makes it unlawful for “any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.” The complaint states that the Anzas’ goal, which 455*455 they achieved, was to give National a competitive advantage over Ideal.

 

The second cause of action is asserted against all three petitioners. It alleges a violation of § 1962(a), which makes it unlawful for any person who has received income derived from a pattern of racketeering activity “to use or invest” that income “in acquisition of any interest in, or the establishment or operation of,” an enterprise engaged in or affecting interstate or foreign commerce. As described in the complaint, petitioners used funds generated by their fraudulent tax scheme to open National’s Bronx location. The opening of this new facility caused Ideal to lose “significant business and market share.” App. 18.

Petitioners moved to dismiss Ideal’s complaint under Federal Rules of Civil Procedure 12(b)(6) and 9(b). The District Court granted the Rule 12(b)(6) motion, holding that the complaint failed to state a claim upon which relief could be granted. The court began from the proposition that to assert a RICO claim predicated on mail fraud or wire fraud, a plaintiff must have relied on the defendant’s misrepresentations. Ideal not having alleged that it relied on petitioners’ false tax returns, the court concluded Ideal could not go forward with its RICO claims.

 

Ideal appealed, and the Court of Appeals for the Second Circuit vacated the District Court’s judgment. 373 F. 3d 251 (2004). Addressing Ideal’s § 1962(c) claim, the court held that where a complaint alleges a pattern of racketeering activity “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.” Id., at 263. This is the case, the court explained, “even where the scheme depended on fraudulent communications directed to and relied on by a third party rather than the plaintiff.” Ibid.

The court reached the same conclusion with respect to Ideal’s § 1962(a) claim. It reasoned that Ideal adequately pleaded its claim because it alleged an injury by reason of petitioners’ use and investment of racketeering proceeds, “as distinct from injury traceable simply to the predicate acts of racketeering alone or to the conduct of the business of the enterprise.” Id., at 264.

 We granted certiorari. 546 U. S. 1029 (2005).

 II

 Our analysis begins—and, as will become evident, largely ends—with Holmes. That case arose from a complaint filed by the Securities Investor Protection Corporation (SIPC), a private corporation with a duty to reimburse the customers of registered broker-dealers who became unable to meet their financial obligations. SIPC claimed that the petitioner, Robert Holmes, conspired with others to manipulate stock prices. When the market detected the fraud, the share prices plummeted, and the “decline caused [two] broker-dealers’ financial difficulties resulting in their eventual liquidation and SIPC’s advance of nearly $13 million to cover their customers’ claims.” 503 U. S., at 262, 263. SIPC sued on several theories, including that Holmes participated in the conduct of an enterprise’s affairs through a pattern of racketeering activity in violation of § 1962(c) and conspired to do so in violation of § 1962(d).

 

The Court held that SIPC could not maintain its RICO claims against Holmes for his alleged role in the scheme. The decision relied on a careful interpretation of § 1964(c), which provides a civil cause of action to persons injured “by reason of” a defendant’s RICO violation. The Court recognized the phrase “by reason of” could be read broadly to require merely that the claimed violation was a “but for” cause of the plaintiff’s injury. Id., at 265-266. It rejected this reading, however, noting the “unlikelihood that Congress meant to allow all factually injured plaintiffs to recover.” Id., at 266.

 

457*457 Proper interpretation of § 1964(c) required consideration of the statutory history, which revealed that “Congress modeled § 1964(c) on the civil-action provision of the federal anti-trust laws, § 4 of the Clayton Act.” Id., at 267. In Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U. S. 519 (1983), the Court held that “a plaintiff’s right to sue under § 4 required a showing that the defendant’s violation not only was a `but for’ cause of his injury, but was the proximate cause as well.” Holmes, supra, at 268 (citing Associated Gen. Contractors, supra, at 534). This reasoning, the Court noted in Holmes, “applies just as readily to § 1964(c).” 503 U. S., at 268.

 

The Holmes Court turned to the common-law foundations of the proximate-cause requirement, and specifically the “demand for some direct relation between the injury asserted and the injurious conduct alleged.” Ibid. It concluded that even if SIPC were subrogated to the rights of certain aggrieved customers, the RICO claims could not satisfy this requirement of directness. The deficiency, the Court explained, was that “the link is too remote between the stock manipulation alleged and the customers’ harm, being purely contingent on the harm suffered by the broker-dealers.” Id., at 271.

 

Applying the principles of Holmes to the present case, we conclude Ideal cannot maintain its claim based on § 1962(c). Section 1962(c), as noted above, forbids conducting or participating in the conduct of an enterprise’s affairs through a pattern of racketeering activity. The Court has indicated the compensable injury flowing from a violation of that provision “necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern, for the essence of the violation is the commission of those acts in connection with the conduct of an enterprise.” Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479, 497 (1985).

 

Ideal’s theory is that Joseph and Vincent Anza harmed it by defrauding the New York tax authority and using the 458*458 proceeds from the fraud to offer lower prices designed to attract more customers. The RICO violation alleged by Ideal is that the Anzas conducted National’s affairs through a pattern of mail fraud and wire fraud. The direct victim of this conduct was the State of New York, not Ideal. It was the State that was being defrauded and the State that lost tax revenue as a result.

 

The proper referent of the proximate-cause analysis is an alleged practice of conducting National’s business through a pattern of defrauding the State. To be sure, Ideal asserts it suffered its own harms when the Anzas failed to charge customers for the applicable sales tax. The cause of Ideal’s asserted harms, however, is a set of actions (offering lower prices) entirely distinct from the alleged RICO violation (defrauding the State). The attenuation between the plaintiff’s harms and the claimed RICO violation arises from a different source in this case than in Holmes, where the alleged violations were linked to the asserted harms only through the broker-dealers’ inability to meet their financial obligations. Nevertheless, the absence of proximate causation is equally clear in both cases.

 

This conclusion is confirmed by considering the directness requirement’s underlying premises. See 503 U. S., at 269-270. One motivating principle is the difficulty that can arise when a court attempts to ascertain the damages caused by some remote action. See id., at 269 (“[T]he less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff’s damages attributable to the violation, as distinct from other, independent, factors”). The instant case is illustrative. The injury Ideal alleges is its own loss of sales resulting from National’s decreased prices for cashpaying customers. National, however, could have lowered its prices for any number of reasons unconnected to the asserted pattern of fraud. It may have received a cash inflow from some other source or concluded that the additional sales would justify a smaller profit margin. Its lowering of prices 459*459 in no sense required it to defraud the state tax authority. Likewise, the fact that a company commits tax fraud does not mean the company will lower its prices; the additional cash could go anywhere from asset acquisition to research and development to dividend payouts. Cf. id., at 271 (“The broker-dealers simply cannot pay their bills, and only that intervening insolvency connects the conspirators’ acts to the losses suffered by the nonpurchasing customers and general creditors”).

 

There is, in addition, a second discontinuity between the RICO violation and the asserted injury. Ideal’s lost sales could have resulted from factors other than petitioners’ alleged acts of fraud. Businesses lose and gain customers for many reasons, and it would require a complex assessment to establish what portion of Ideal’s lost sales were the product of National’s decreased prices. Cf. id., at 272-273 (“If the nonpurchasing customers were allowed to sue, the district court would first need to determine the extent to which their inability to collect from the broker-dealers was the result of the alleged conspiracy to manipulate, as opposed to, say, the broker-dealers’ poor business practices or their failures to anticipate developments in the financial markets”).

 

The attenuated connection between Ideal’s injury and the Anzas’ injurious conduct thus implicates fundamental concerns expressed in Holmes. Notwithstanding the lack of any appreciable risk of duplicative recoveries, which is another consideration relevant to the proximate-cause inquiry, see id., at 269, these concerns help to illustrate why Ideal’s alleged injury was not the direct result of a RICO violation. Further illustrating this point is the speculative nature of the proceedings that would follow if Ideal were permitted to maintain its claim. A court considering the claim would need to begin by calculating the portion of National’s price drop attributable to the alleged pattern of racketeering activity. It next would have to calculate the portion of Ideal’s lost sales attributable to the relevant part of the price drop. 460*460 The element of proximate causation recognized in Holmes is meant to prevent these types of intricate, uncertain inquiries from overrunning RICO litigation. It has particular resonance when applied to claims brought by economic competitors, which, if left unchecked, could blur the line between RICO and the antitrust laws.

 

The requirement of a direct causal connection is especially warranted where the immediate victims of an alleged RICO violation can be expected to vindicate the laws by pursuing their own claims. See id., at 269-270 (“[D]irectly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely”). Again, the instant case is instructive. Ideal accuses the Anzas of defrauding the State of New York out of a substantial amount of money. If the allegations are true, the State can be expected to pursue appropriate remedies. The adjudication of the State’s claims, moreover, would be relatively straightforward; while it may be difficult to determine facts such as the number of sales Ideal lost due to National’s tax practices, it is considerably easier to make the initial calculation of how much tax revenue the Anzas withheld from the State. There is no need to broaden the universe of actionable harms to permit RICO suits by parties who have been injured only indirectly.

 

The Court of Appeals reached a contrary conclusion, apparently reasoning that because the Anzas allegedly sought to gain a competitive advantage over Ideal, it is immaterial whether they took an indirect route to accomplish their goal. See 373 F. 3d, at 263. This rationale does not accord with Holmes. A RICO plaintiff cannot circumvent the proximate-cause requirement simply by claiming that the defendant’s aim was to increase market share at a competitor’s expense. See Associated Gen. Contractors, 459 U. S., at 537 (“We are also satisfied that an allegation of improper motive 461*461. . . is not a panacea that will enable any complaint to withstand a motion to dismiss”). When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff’s injuries. In the instant case, the answer is no. We hold that Ideal’s § 1962(c) claim does not satisfy the requirement of proximate causation.

 

Petitioners alternatively ask us to hold, in line with the District Court’s decision granting petitioners’ motion to dismiss, that a plaintiff may not assert a RICO claim predicated on mail fraud or wire fraud unless it demonstrates it relied on the defendant’s misrepresentations. They argue that RICO’s private right of action must be interpreted in light of common-law principles, and that at common law a fraud action requires the plaintiff to prove reliance. Because Ideal has not satisfied the proximate-cause requirement articulated in Holmes, we have no occasion to address the substantial question whether a showing of reliance is required. Cf. 503 U. S., at 275-276.

 

 

III

 

 

The amended complaint also asserts a RICO claim based on a violation of § 1962(a). The claim alleges petitioners’ tax scheme provided them with funds to open a new store in the Bronx, which attracted customers who otherwise would have purchased from Ideal.

 

In this Court petitioners contend that the proximate-cause analysis should function identically for purposes of Ideal’s § 1962(c) claim and its § 1962(a) claim. (Petitioners also contend that “a civil RICO plaintiff does not plead an injury proximately caused by a violation of § 1962(a) merely by alleging that a corporate defendant reinvested profits back into itself,” Brief for Petitioners 20, n. 5, but this argument has not been developed, and we decline to address it.) It is true that private actions for violations of § 1962(a), like actions for violations of § 1962(c), must be asserted under 462*462 § 1964(c). It likewise is true that a claim is cognizable under § 1964(c) only if the defendant’s alleged violation proximately caused the plaintiff’s injury. The proximate-cause inquiry, however, requires careful consideration of the “relation between the injury asserted and the injurious conduct alleged.” Holmes, supra, at 268. Because § 1962(c) and § 1962(a) set forth distinct prohibitions, it is at least debatable whether Ideal’s two claims should be analyzed in an identical fashion for proximate-cause purposes.

 

The Court of Appeals held that Ideal adequately pleaded its § 1962(a) claim, see 373 F. 3d, at 264, but the court did not address proximate causation. We decline to consider Ideal’s § 1962(a) claim without the benefit of the Court of Appeals’ analysis, particularly given that the parties have devoted nearly all their attention in this Court to the § 1962(c) claim. We therefore vacate the Court of Appeals’ judgment with respect to Ideal’s § 1962(a) claim. On remand, the court should determine whether petitioners’ alleged violation of § 1962(a) proximately caused the injuries Ideal asserts.

 

 

* * *

 

 

The judgment of the Court of Appeals is reversed in part and vacated in part. The case is remanded for further proceedings consistent with this opinion.

 

 

JUSTICE KENNEDY delivered the opinion of the Court.

 

The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U. S. C. §§ 1961-1968 (2000 ed. and Supp. III), prohibits certain conduct involving a “pattern of racketeering activity.” § 1962 (2000 ed.). One of RICO’s enforcement mechanisms is a private right of action, available to “[a]ny person injured in his business or property by reason of a violation” of RICO’s substantive restrictions. § 1964(c).

 

In Holmes v. Securities Investor Protection Corporation, 503 U. S. 258, 268 (1992), this Court held that a plaintiff may sue under § 1964(c) only if the alleged RICO violation was the proximate cause of the plaintiff’s injury. The instant case requires us to apply the principles discussed in Holmes to a dispute between two competing businesses.

 

 

I

 

 

Because this case arises from a motion to dismiss, we accept as true the factual allegations in the amended complaint. See Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U. S. 163, 164 (1993).

 

Respondent Ideal Steel Supply Corporation (Ideal) sells steel mill products along with related supplies and services. It operates two store locations in New York, one in Queens and the other in the Bronx. Petitioner National Steel Supply, 454*454 Inc. (National), owned by petitioners Joseph and Vincent Anza, is Ideal’s principal competitor. National offers a similar array of products and services, and it, too, operates one store in Queens and one in the Bronx.

 

Ideal sued petitioners in the United States District Court for the Southern District of New York. It claimed petitioners were engaged in an unlawful racketeering scheme aimed at “gain[ing] sales and market share at Ideal’s expense.” App. 7. According to Ideal, National adopted a practice of failing to charge the requisite New York sales tax to cashpaying customers, even when conducting transactions that were not exempt from sales tax under state law. This practice allowed National to reduce its prices without affecting its profit margin. Petitioners allegedly submitted fraudulent tax returns to the New York State Department of Taxation and Finance in an effort to conceal their conduct.

 

Ideal’s amended complaint contains, as relevant here, two RICO claims. The claims assert that petitioners, by submitting the fraudulent tax returns, committed various acts of mail fraud (when they sent the returns by mail) and wire fraud (when they sent them electronically). See 18 U. S. C. §§ 1341, 1343 (2000 ed., Supp. III). Mail fraud and wire fraud are forms of “racketeering activity” for purposes of RICO. § 1961(1)(B). Petitioners’ conduct allegedly constituted a “pattern of racketeering activity,” see § 1961(5) (2000 ed.), because the fraudulent returns were submitted on an ongoing and regular basis.

 

Ideal asserts in its first cause of action that Joseph and Vincent Anza violated § 1962(c), which makes it unlawful for “any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.” The complaint states that the Anzas’ goal, which 455*455 they achieved, was to give National a competitive advantage over Ideal.

 

The second cause of action is asserted against all three petitioners. It alleges a violation of § 1962(a), which makes it unlawful for any person who has received income derived from a pattern of racketeering activity “to use or invest” that income “in acquisition of any interest in, or the establishment or operation of,” an enterprise engaged in or affecting interstate or foreign commerce. As described in the complaint, petitioners used funds generated by their fraudulent tax scheme to open National’s Bronx location. The opening of this new facility caused Ideal to lose “significant business and market share.” App. 18.

 

Petitioners moved to dismiss Ideal’s complaint under Federal Rules of Civil Procedure 12(b)(6) and 9(b). The District Court granted the Rule 12(b)(6) motion, holding that the complaint failed to state a claim upon which relief could be granted. The court began from the proposition that to assert a RICO claim predicated on mail fraud or wire fraud, a plaintiff must have relied on the defendant’s misrepresentations. Ideal not having alleged that it relied on petitioners’ false tax returns, the court concluded Ideal could not go forward with its RICO claims.

 

Ideal appealed, and the Court of Appeals for the Second Circuit vacated the District Court’s judgment. 373 F. 3d 251 (2004). Addressing Ideal’s § 1962(c) claim, the court held that where a complaint alleges a pattern of racketeering activity “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.” Id., at 263. This is the case, the court explained, “even where the scheme depended on fraudulent communications directed to and relied on by a third party rather than the plaintiff.” Ibid.

 

The court reached the same conclusion with respect to Ideal’s § 1962(a) claim. It reasoned that Ideal adequately 456*456 pleaded its claim because it alleged an injury by reason of petitioners’ use and investment of racketeering proceeds, “as distinct from injury traceable simply to the predicate acts of racketeering alone or to the conduct of the business of the enterprise.” Id., at 264.

 

We granted certiorari. 546 U. S. 1029 (2005).

 

 

II

 

 

Our analysis begins—and, as will become evident, largely ends—with Holmes. That case arose from a complaint filed by the Securities Investor Protection Corporation (SIPC), a private corporation with a duty to reimburse the customers of registered broker-dealers who became unable to meet their financial obligations. SIPC claimed that the petitioner, Robert Holmes, conspired with others to manipulate stock prices. When the market detected the fraud, the share prices plummeted, and the “decline caused [two] broker-dealers’ financial difficulties resulting in their eventual liquidation and SIPC’s advance of nearly $13 million to cover their customers’ claims.” 503 U. S., at 262, 263. SIPC sued on several theories, including that Holmes participated in the conduct of an enterprise’s affairs through a pattern of racketeering activity in violation of § 1962(c) and conspired to do so in violation of § 1962(d).

 

The Court held that SIPC could not maintain its RICO claims against Holmes for his alleged role in the scheme. The decision relied on a careful interpretation of § 1964(c), which provides a civil cause of action to persons injured “by reason of” a defendant’s RICO violation. The Court recognized the phrase “by reason of” could be read broadly to require merely that the claimed violation was a “but for” cause of the plaintiff’s injury. Id., at 265-266. It rejected this reading, however, noting the “unlikelihood that Congress meant to allow all factually injured plaintiffs to recover.” Id., at 266.

 

457*457 Proper interpretation of § 1964(c) required consideration of the statutory history, which revealed that “Congress modeled § 1964(c) on the civil-action provision of the federal anti-trust laws, § 4 of the Clayton Act.” Id., at 267. In Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U. S. 519 (1983), the Court held that “a plaintiff’s right to sue under § 4 required a showing that the defendant’s violation not only was a `but for’ cause of his injury, but was the proximate cause as well.” Holmes, supra, at 268 (citing Associated Gen. Contractors, supra, at 534). This reasoning, the Court noted in Holmes, “applies just as readily to § 1964(c).” 503 U. S., at 268.

 

The Holmes Court turned to the common-law foundations of the proximate-cause requirement, and specifically the “demand for some direct relation between the injury asserted and the injurious conduct alleged.” Ibid. It concluded that even if SIPC were subrogated to the rights of certain aggrieved customers, the RICO claims could not satisfy this requirement of directness. The deficiency, the Court explained, was that “the link is too remote between the stock manipulation alleged and the customers’ harm, being purely contingent on the harm suffered by the broker-dealers.” Id., at 271.

 

Applying the principles of Holmes to the present case, we conclude Ideal cannot maintain its claim based on § 1962(c). Section 1962(c), as noted above, forbids conducting or participating in the conduct of an enterprise’s affairs through a pattern of racketeering activity. The Court has indicated the compensable injury flowing from a violation of that provision “necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern, for the essence of the violation is the commission of those acts in connection with the conduct of an enterprise.” Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479, 497 (1985).

 

Ideal’s theory is that Joseph and Vincent Anza harmed it by defrauding the New York tax authority and using the 458*458 proceeds from the fraud to offer lower prices designed to attract more customers. The RICO violation alleged by Ideal is that the Anzas conducted National’s affairs through a pattern of mail fraud and wire fraud. The direct victim of this conduct was the State of New York, not Ideal. It was the State that was being defrauded and the State that lost tax revenue as a result.

 

The proper referent of the proximate-cause analysis is an alleged practice of conducting National’s business through a pattern of defrauding the State. To be sure, Ideal asserts it suffered its own harms when the Anzas failed to charge customers for the applicable sales tax. The cause of Ideal’s asserted harms, however, is a set of actions (offering lower prices) entirely distinct from the alleged RICO violation (defrauding the State). The attenuation between the plaintiff’s harms and the claimed RICO violation arises from a different source in this case than in Holmes, where the alleged violations were linked to the asserted harms only through the broker-dealers’ inability to meet their financial obligations. Nevertheless, the absence of proximate causation is equally clear in both cases.

 

This conclusion is confirmed by considering the directness requirement’s underlying premises. See 503 U. S., at 269-270. One motivating principle is the difficulty that can arise when a court attempts to ascertain the damages caused by some remote action. See id., at 269 (“[T]he less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff’s damages attributable to the violation, as distinct from other, independent, factors”). The instant case is illustrative. The injury Ideal alleges is its own loss of sales resulting from National’s decreased prices for cashpaying customers. National, however, could have lowered its prices for any number of reasons unconnected to the asserted pattern of fraud. It may have received a cash inflow from some other source or concluded that the additional sales would justify a smaller profit margin. Its lowering of prices 459*459 in no sense required it to defraud the state tax authority. Likewise, the fact that a company commits tax fraud does not mean the company will lower its prices; the additional cash could go anywhere from asset acquisition to research and development to dividend payouts. Cf. id., at 271 (“The broker-dealers simply cannot pay their bills, and only that intervening insolvency connects the conspirators’ acts to the losses suffered by the nonpurchasing customers and general creditors”).

 

There is, in addition, a second discontinuity between the RICO violation and the asserted injury. Ideal’s lost sales could have resulted from factors other than petitioners’ alleged acts of fraud. Businesses lose and gain customers for many reasons, and it would require a complex assessment to establish what portion of Ideal’s lost sales were the product of National’s decreased prices. Cf. id., at 272-273 (“If the nonpurchasing customers were allowed to sue, the district court would first need to determine the extent to which their inability to collect from the broker-dealers was the result of the alleged conspiracy to manipulate, as opposed to, say, the broker-dealers’ poor business practices or their failures to anticipate developments in the financial markets”).

 

The attenuated connection between Ideal’s injury and the Anzas’ injurious conduct thus implicates fundamental concerns expressed in Holmes. Notwithstanding the lack of any appreciable risk of duplicative recoveries, which is another consideration relevant to the proximate-cause inquiry, see id., at 269, these concerns help to illustrate why Ideal’s alleged injury was not the direct result of a RICO violation. Further illustrating this point is the speculative nature of the proceedings that would follow if Ideal were permitted to maintain its claim. A court considering the claim would need to begin by calculating the portion of National’s price drop attributable to the alleged pattern of racketeering activity. It next would have to calculate the portion of Ideal’s lost sales attributable to the relevant part of the price drop. 460*460 The element of proximate causation recognized in Holmes is meant to prevent these types of intricate, uncertain inquiries from overrunning RICO litigation. It has particular resonance when applied to claims brought by economic competitors, which, if left unchecked, could blur the line between RICO and the antitrust laws.

 

The requirement of a direct causal connection is especially warranted where the immediate victims of an alleged RICO violation can be expected to vindicate the laws by pursuing their own claims. See id., at 269-270 (“[D]irectly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely”). Again, the instant case is instructive. Ideal accuses the Anzas of defrauding the State of New York out of a substantial amount of money. If the allegations are true, the State can be expected to pursue appropriate remedies. The adjudication of the State’s claims, moreover, would be relatively straightforward; while it may be difficult to determine facts such as the number of sales Ideal lost due to National’s tax practices, it is considerably easier to make the initial calculation of how much tax revenue the Anzas withheld from the State. There is no need to broaden the universe of actionable harms to permit RICO suits by parties who have been injured only indirectly.

 

The Court of Appeals reached a contrary conclusion, apparently reasoning that because the Anzas allegedly sought to gain a competitive advantage over Ideal, it is immaterial whether they took an indirect route to accomplish their goal. See 373 F. 3d, at 263. This rationale does not accord with Holmes. A RICO plaintiff cannot circumvent the proximate-cause requirement simply by claiming that the defendant’s aim was to increase market share at a competitor’s expense. See Associated Gen. Contractors, 459 U. S., at 537 (“We are also satisfied that an allegation of improper motive 461*461. . . is not a panacea that will enable any complaint to withstand a motion to dismiss”). When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff’s injuries. In the instant case, the answer is no. We hold that Ideal’s § 1962(c) claim does not satisfy the requirement of proximate causation.

 

Petitioners alternatively ask us to hold, in line with the District Court’s decision granting petitioners’ motion to dismiss, that a plaintiff may not assert a RICO claim predicated on mail fraud or wire fraud unless it demonstrates it relied on the defendant’s misrepresentations. They argue that RICO’s private right of action must be interpreted in light of common-law principles, and that at common law a fraud action requires the plaintiff to prove reliance. Because Ideal has not satisfied the proximate-cause requirement articulated in Holmes, we have no occasion to address the substantial question whether a showing of reliance is required. Cf. 503 U. S., at 275-276.

 

 

III

 

 

The amended complaint also asserts a RICO claim based on a violation of § 1962(a). The claim alleges petitioners’ tax scheme provided them with funds to open a new store in the Bronx, which attracted customers who otherwise would have purchased from Ideal.

 

In this Court petitioners contend that the proximate-cause analysis should function identically for purposes of Ideal’s § 1962(c) claim and its § 1962(a) claim. (Petitioners also contend that “a civil RICO plaintiff does not plead an injury proximately caused by a violation of § 1962(a) merely by alleging that a corporate defendant reinvested profits back into itself,” Brief for Petitioners 20, n. 5, but this argument has not been developed, and we decline to address it.) It is true that private actions for violations of § 1962(a), like actions for violations of § 1962(c), must be asserted under 462*462 § 1964(c). It likewise is true that a claim is cognizable under § 1964(c) only if the defendant’s alleged violation proximately caused the plaintiff’s injury. The proximate-cause inquiry, however, requires careful consideration of the “relation between the injury asserted and the injurious conduct alleged.” Holmes, supra, at 268. Because § 1962(c) and § 1962(a) set forth distinct prohibitions, it is at least debatable whether Ideal’s two claims should be analyzed in an identical fashion for proximate-cause purposes.

 

The Court of Appeals held that Ideal adequately pleaded its § 1962(a) claim, see 373 F. 3d, at 264, but the court did not address proximate causation. We decline to consider Ideal’s § 1962(a) claim without the benefit of the Court of Appeals’ analysis, particularly given that the parties have devoted nearly all their attention in this Court to the § 1962(c) claim. We therefore vacate the Court of Appeals’ judgment with respect to Ideal’s § 1962(a) claim. On remand, the court should determine whether petitioners’ alleged violation of § 1962(a) proximately caused the injuries Ideal asserts.

 

 

* * *

 

 

The judgment of the Court of Appeals is reversed in part and vacated in part. The case is remanded for further proceedings consistent with this opinion.

 

It is so ordered.

It is so ordered.

Enterprise and continuity requirement in a real estate RICO claim

`The Court dismissed the complaint alleging mortgage fraud. Basically, the court found plausible proof of a fraud affecting the plaintiff, but not others.

“Hopkins’ allegations, however, do not pled facts showing the associates of the enterprise— here, AHMSI and Citibank—function as a continuing unit. “[T]he continuity requirement focuses on whether the associates’ behavior was `ongoing’ rather than isolated activity.” Odom, 486 F.3d at 553; Bryant v. Mattel, Inc., 573 F. Supp. 2d 1254, 1263 (C.D. Cal. 2007) (“The `continuing unit’ requirement . . . is related to the notion that RICO was not meant to address discrete instances of fraud or criminal conduct.”). Courts often look to the length of time that the associates have interacted to determine whether they functioned as a continuing unit. See Bryant, 573 F. Supp. 2d at 1263 (“[T]his requirement is related to the duration of the racketeering activities.”); see also Odom, 486 F.3d at 553 (“An almost two-year time span is far more than adequate to establish that Best Buy and Microsoft functioned as a continuing unit.”).

Similar to his failure to establish a pattern of racketeering activity, discussed further below, Hopkins’ allegations do not indicate that the defendants’ alleged behavior is ongoing, rather than isolated. See Turkette, 452 U.S. at 583 (noting “the proof used to establish these separate elements may in particular cases coalesce”). Even if the four cancelled checks were the proximate cause of Hopkins’ non-judicial foreclosure, this alone is not sufficient to indicate that Citibank and AHMSI function as a continuing unit. Cf. Izenberg, 589 F. Supp. 2d at 1203 (finding no continuing unit when plaintiffs’ complaint was focused on a single foreclosure sale); Gamboa v. Tr. Corps, 09-0007 SC, 2009 WL 656285, at *5 (N.D. Cal. Mar. 12, 2009) (same). Accordingly, the complaint fails adequately to identify a RICO enterprise.”

Opinion Hopkins v. American Home Mortgage Servicing

No. 13-4447 United States District Court, N.D. California, San Francisco Division.

February 13, 2014.

RICHARD SEEBORG, District Judge.

I. INTRODUCTION

This action was removed to federal court following years of litigation before the Alameda County Superior Court. Several motions are now pending: defendant Citibank’s motions to dismiss and to strike portions of plaintiff’s fourth amended complaint (FAC) and defendant American Home Mortgage Servicing, Inc.’s motion to dismiss the FAC. For the following reasons, defendants’ motions to dismiss are granted in part with respect to plaintiff’s federal claims. In particular, the eighteenth claim for relief (under RICO) is dismissed with leave to amend and the eighth claim (under RESPA) is dismissed with prejudice and without leave to amend. In addition, plaintiff is ordered to show cause why his remaining federal claim against defendant ABC should not be dismissed. If plaintiff wishes to remain in federal court, he must file an amended complaint and respond to this order within thirty (30) days.[1]

II. BACKGROUND

Plaintiff Donald Ray Hopkins contends that defendants Citibank, Homeward Residential Inc. (Homeward) f/k/a American Home Mortgages Servicing Inc. (AHMSI),[2] and American Home Mortgage Corp. d/b/a American Brokers Conduit (ABC) conspired to foreclose upon his home in Oakland, California. According to Hopkins, AHMSI and ABC secretly instructed his bank, Citibank, to cancel several timely electronic mortgage payments. Hopkins avers that defendants blamed him for the resulting nonpayment, thereby creating a pretext for the subsequent non-judicial foreclosure of his home, which they allegedly sold at a significant profit.

Hopkins filed this action in the Alameda County Superior Court in June 2011. Some two years and four amended complaints later, Hopkins for the first time alleged several federal claims for relief in August 2013. Defendants removed, contending this court has original jurisdiction over Hopkins’ federal claims and supplemental jurisdiction over his state law claims. Shortly thereafter, Citigroup filed motions to strike and to dismiss the FAC, with AHMSI bringing its own motion to dismiss. More than two weeks after the opposition deadlines passed for all three aforementioned motions, Hopkins moved to stay these proceedings, because defendant ABC, the purported originator and holder of the mortgage at issue, had filed for bankruptcy protection. (ECF No. 29; ECF No. 35).

A previous order denied Hopkins’ motion to stay and ordered him to file responses to defendants’ motions by December 17, 2013. (ECF No. 38). Hopkins filed separate oppositions to Citibank’s and AHMSI’s motions to dismiss, but did not oppose Citibank’s motion to strike.[3] (ECF No. 39; ECF No. 40). Hopkins argues that all of his claims are properly pleaded or, in the alternative, that leave to amend is warranted. Citibank and AHMSI filed replies requesting Hopkins’ claims be dismissed with prejudice. The motions were submitted without oral argument pursuant to Civil Local Rule 7-1(b).

III. LEGAL STANDARD

A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). While “detailed factual allegations are not required,” a complaint must have sufficient factual allegations to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 566 U.S. 652, 678 (2009) (citing Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This standard asks for “more than a sheer possibility that a defendant acted unlawfully.” Id. The determination is a context-specific task requiring the court “to draw in its judicial experience and common sense.” Id. at 1950.

A motion to dismiss a complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Dismissal under Rule 12(b)(6) may be based on either the “lack of a cognizable legal theory” or on “the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). When evaluating such a motion, the court must accept all material allegations in the complaint as true, even if doubtful, and construe them in the light most favorable to the non-moving party. Twombly, 550 U.S. at 570. “[C]onclusory allegations of law and unwarranted inferences,” however, “are insufficient to defeat a motion to dismiss for failure to state a claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996); see also Twombly, 550 U.S. at 555 (“threadbare recitals of the elements of the claim for relief, supported by mere conclusory statements,” are not taken as true).

IV. DISCUSSION

A. Eighth Claim for Relief for Violating the Real Estate Settlement Procedures Act (RESPA)

Under RESPA, “[e]ach transferee servicer to whom the servicing of any federally related mortgage loan is assigned, sold, or transferred shall notify the borrower of any such assignment, sale, or transfer.” 12 U.S.C § 2605(c)(1) (2012). RESPA also requires loan servicers to respond to Qualified Written Requests (QWR) submitted by borrowers. § 2605(e). Hopkins alleges AHMSI violated RESPA, because AHMSI failed to provide (1) notice when it began servicing the loan, (2) notice when AHMSI filed for bankruptcy, (3) copies of the operative loan documents, and (4) a response to Hopkins’ March 30, 2012 QWR. (FAC, Exb. A at ¶¶ 22, 69-70). As an initial matter, it is not clear that RESPA requires loan servicers to provide borrowers with notice of bankruptcy proceedings or copies of loan documents. Hopkins does not invoke a single piece of legal authority to support his contrary contention.

More importantly, Hopkins fails to allege any pecuniary loss attributable to the RESPA violations. This defect is fatal to his RESPA claims. RESPA provides that anyone who fails to comply with its provisions shall be liable to the borrower for “any actual damages to the borrower as a result of the failure[.]” 12 U.S.C. § 2605(f). “Although this section does not explicitly set this out as a pleading standard, a number of courts have read the statute as requiring a showing of pecuniary damage in order to state a claim.” Allen v. United Financial Mortg. Corp., 660 F. Supp. 2d 1089, 1097 (N.D. Cal 2009). To advance a RESPA claim, a “[p]laintiff must, at a minimum, also allege that the breach resulted in actual damages.” Id. (citing Hutchinson v. Delaware Sav. Bank FSB, 410 F. Supp. 2d 374, 383 (D.N.J. 2006)). “This pleading requirement has the effect of limiting the cause of action to circumstances in which plaintiffs can show that a failure of notice has caused them actual harm.” Id. at 1097. Courts, however, “have interpreted this requirement [to plead pecuniary damage] liberally.” Yulaeva v. Greenpoint Mortgage Funding, Inc., CIVS-09-1504 LKK/KJM, 2009 WL 2880393, at *15 (E.D. Cal. Sept. 3, 2009). For example, in Hutchinson, plaintiffs pled sufficient pecuniary loss by claiming they suffered negative credit ratings when the servicer submitted delinquency notices to credit bureaus after receiving a QWR. 410 F. Supp. 2d at 383.

Here, Hopkins offers only conclusory allegations that he is entitled to damages and attorney fees under RESPA. (See FAC at ¶ 72). Hopkins fails to explain how the alleged RESPA violations caused him any pecuniary loss. See Shepherd v. Am. Home Mortgage Servs., Inc., CIV 209-1916 WBS GGH, 2009 WL 4505925 (E.D. Cal. Nov. 20, 2009) (concluding plaintiff’s allegation he “suffered and continue[d] to suffer damages and costs of suit” was insufficient even under “a liberal pleading standard for harm”). The specific harms plaintiff complains of—the converted loan payments, improper late fees, and non-judicial foreclosure—allegedly resulted from defendants conspiring to cancel Hopkins’ electronic checks and Hopkins ceasing his loan payments. These injuries do not flow from AHMSI’s alleged RESPA violations. Indeed, the complaint suggests that Hopkins was aware during the relevant time period that AHMSI serviced his loan, as he made loan payments to AHMSI since at least July 2008. (See Customer Account Activity Statement, FAC, Exb. 3). Moreover, Hopkins’ QWR was not submitted until March 2012, a year after Hopkins admittedly stopped paying his loans. See Allen, 660 F. Supp. 2d at 1097 (stating plaintiff’s “loss of property appears to have been caused by his default”). Because it does not appear that Hopkins can cure this deficiency with additional good faith pleading, Hopkins’ eighth claim for relief is dismissed with prejudice.

B. Eighteenth Claim for Relief for Violating the Racketeer Influenced and Corrupt Organizations Act (RICO)

To state a RICO claim, a plaintiff must allege that defendant (a) received income derived from a pattern of racketeering activity, and used the income to acquire or invest in an enterprise; (b) acquired an interest in, or control of, an enterprise through a pattern of racketeering activity; (c) conducted or participated in the conduct of an enterprise through a pattern of racketeering activity; or (d) conspired to engage in any of these activities. See 18 U.S.C. § 1962(a)-(d). Although Hopkins’ complaint does not specify which RICO subsection(s) defendants allegedly violated, his allegations most closely fit § 1962(c) and are analyzed accordingly.[4] See Reynolds v. E. Dyer Dev. Co., 882 F.2d 1249, 1251 (7th Cir. 1989) (stating “[I]t is essential to plead precisely . . . the RICO section allegedly violated[,]” but affirming district court decision to analyze under § 1962(c)). Under § 1962(c), a plaintiff must allege: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as `predicate acts’) (5) causing injury to plaintiff’s business or property.” Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir.1996) (citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)).

“[R]acketeering activity” is any act indictable under several provisions of Title 18 of the United States Code, and includes the predicate acts of mail fraud and wire fraud, each of which is alleged in this case.[5] Turner v. Cook, 362 F.3d 1219, 1229 (9th Cir. 2004) (citing 18 U.S.C. § 1961(1)). Claims for mail and wire fraud are subject to Rule 9(b)’s heightened pleading requirements. Sanford v. MemberWorks, Inc., 625 F.3d 550, 557-58 (9th Cir. 2010); Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 (9th Cir. 1991) (“[Rule 9(b)] requires a pleader of fraud to detail with particularity the time, place, and manner of each act of fraud, plus the role of each defendant in each scheme.”).

Hopkins alleges that defendants used mail and wires to disseminate false and misleading information with intent to cause him to miss payments, incur late fees, and default on his home loan.[6] (FAC at ¶¶ 130-145). Specifically, Hopkins avers he directed Citibank to make timely electronic loan payments to AHMSI from July 2010 to October 2010, but AHMSI instructed Citibank to cancel these payments.[7] (Id. at ¶ 1). Hopkins further avers that Citibank and AHMSI either applied these payments to his loan late or converted the funds into secret accounts.[8] (Id. at ¶¶ 1-3). Hopkins’ RICO claim suffers from several deficiencies, which are addressed in turn.

1. RICO Enterprise

Hopkins’ complaint fails to identify a RICO enterprise. “[T]o establish liability under § 1962(c) one must allege and prove the existence of two distinct entities: (1) a `person’; and (2) an `enterprise’ that is not simply the same `person’ referred to by a different name.” Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161, (2001); Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005). A “person” is defined as “any individual or entity capable of holding a legal or beneficial interest in property.” 18 U.S.C. § 1961(3). As AHMSI and Citibank are recognized legal entities, they are “persons” within the meaning of RICO. An “enterprise” is defined to include “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” § 1961(4). Hopkins has not alleged the existence of a separate legal entity apart from the defendants; rather his complaint relies on an association-in-fact between the individual defendants. See Bias v. Wells Fargo & Co., 942 F. Supp. 2d 915, 940 (N.D. Cal. 2013) (“An enterprise that is not a legal entity is commonly known as an `association-in-fact’ enterprise.”).

The Supreme Court in United States v. Turkette stated that an association-in-fact enterprise is “a group of persons associated together for a common purpose of engaging in a course of conduct.” 452 U.S. 576, 583 (1981). Ninth Circuit precedent requires proof of three elements: (i) a common purpose of engaging in a course of conduct; (ii) evidence of an “ongoing organization, formal or informal”; and (iii) evidence that the various associates function as a continuing unit. Odom v. Microsoft Corp., 486 F.3d 541, 551-52 (9th Cir.2007) (en banc) (quoting Turkette, 452 U.S. at 583).[9] However, an “associated-in-fact enterprise under RICO does not require any particular organizational structure, separate or otherwise.” Id. at 551.[10]

Hopkins alleges that the defendants “associated themselves together for a common purpose” of distributing false information to misdirect or steal his monthly loan payments. (FAC at ¶¶ 130, 133). Hopkins specifically alleges that AHSMI and Citibank secretly canceled his checks, deposited the funds into secret accounts, and continued to issue statements indicating his loans had been properly paid. (FAC at ¶¶ 1-3). These allegations, if true, are sufficient to show defendants’ common purpose of misdirecting or stealing Hopkins’ loan payments. See Izenberg v. ETS Servs., LLC, 589 F. Supp. 2d 1193, 1203 (C.D. Cal. 2008) (finding plaintiffs’ allegations that defendants illegally foreclosed on properties “sufficiently plead that defendants had a common purpose— i.e., to collect and foreclose on mortgages illegally”).

Similarly, Hopkins’ allegations are sufficient to show an ongoing organization. A plaintiff properly pleads an ongoing organization when he alleges the vehicle or mechanism used to commit the predicate acts. Odom, 486 F.3d at 552 (“An ongoing organization is a vehicle for the commission of two or more predicate crimes.”) (quotation omitted). Here, Hopkins’ allegations of the canceled checks, secret accounts, and incorrect statements sufficiently show the vehicle for defendants’ alleged fraudulent acts. See id. (finding allegations that defendants established “mechanisms for transferring plaintiffs’ personal and financial information” and a “cross-marketing contract” sufficiently evinced an ongoing organization); Friedman v. 24 Hour Fitness USA, Inc., 580 F. Supp. 2d 985, 993 (C.D. Cal. 2008) (“Plaintiffs’ description of the mechanisms that Defendant set up with each payment processor satisfies the requirement of a `vehicle for the commission of at least two predicate acts of fraud[.]'”).

Hopkins’ allegations, however, do not pled facts showing the associates of the enterprise— here, AHMSI and Citibank—function as a continuing unit. “[T]he continuity requirement focuses on whether the associates’ behavior was `ongoing’ rather than isolated activity.” Odom, 486 F.3d at 553; Bryant v. Mattel, Inc., 573 F. Supp. 2d 1254, 1263 (C.D. Cal. 2007) (“The `continuing unit’ requirement . . . is related to the notion that RICO was not meant to address discrete instances of fraud or criminal conduct.”). Courts often look to the length of time that the associates have interacted to determine whether they functioned as a continuing unit. See Bryant, 573 F. Supp. 2d at 1263 (“[T]his requirement is related to the duration of the racketeering activities.”); see also Odom, 486 F.3d at 553 (“An almost two-year time span is far more than adequate to establish that Best Buy and Microsoft functioned as a continuing unit.”).

Similar to his failure to establish a pattern of racketeering activity, discussed further below, Hopkins’ allegations do not indicate that the defendants’ alleged behavior is ongoing, rather than isolated. See Turkette, 452 U.S. at 583 (noting “the proof used to establish these separate elements may in particular cases coalesce”). Even if the four cancelled checks were the proximate cause of Hopkins’ non-judicial foreclosure, this alone is not sufficient to indicate that Citibank and AHMSI function as a continuing unit. Cf. Izenberg, 589 F. Supp. 2d at 1203 (finding no continuing unit when plaintiffs’ complaint was focused on a single foreclosure sale); Gamboa v. Tr. Corps, 09-0007 SC, 2009 WL 656285, at *5 (N.D. Cal. Mar. 12, 2009) (same). Accordingly, the complaint fails adequately to identify a RICO enterprise.

2. Pattern of Racketeering Activity

Hopkins also fails to aver facts supporting the existence of a RICO pattern. A RICO claim requires a showing of “a pattern of racketeering activity” which is defined as “at least two acts of racketeering activity” in a ten year period. 18 U.S.C. § 1961(5). “Two acts are necessary, but not sufficient, for finding a violation.” Howard v. Am. Online Inc., 208 F.3d 741, 746 (9th Cir. 2000) (citing H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 238 (1989)). “[T]he term `pattern’ itself requires the showing of a relationship between the predicates and of the threat of continuing activity.” Id.

Hopkins fails to allege a RICO pattern, because he has not pled facts supporting either closed-ended or open-ended continuity. “[T]o satisfy the continuity requirement, [a complainant] must prove either a series of related predicates extending over a substantial period of time, i.e., closed-ended continuity, or past conduct that by its nature projects into the future with a threat of repetition, i.e. open-ended continuity.” Steam Press Holdings, Inc. v. Hawaii Teamsters, Allied Workers Union, Local 996, 302 F.3d 998, 1011 (9th Cir. 2002) (quoting Howard, 208 F.3d at 750) (alteration original). Defendants’ alleged predicate acts occurred over a four-month period and are insufficient to show closed-ended continuity. See Howard, 208 F.3d at 750 (“Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy [the closed-ended continuity] requirement. . . . Activity that lasts only a few months is not sufficiently continuous.”) (alteration original); Liu v. Li, EDCV 10-00952 ODW, 2010 WL 4286265, at *5 (C.D. Cal. Oct. 21, 2010) (finding plaintiffs did not sufficiently allege a “pattern” when the predicate acts of wire and mail fraud spanned from January 10, 2007 to March 12, 2007).

Open-ended continuity is shown by “[p]redicate acts that specifically threaten repetition or that become a `regular way of doing business.'” Id. (quoting Allwaste, Inc. v. Hecht, 65 F.3d 1523, 1528 (9th Cir. 1995)). Hopkins fails to allege facts that plausibly support his theory defendants improperly cancel customer loan payments as part of their regular way of doing business. Hopkins’ conclusory allegation, unsupported by any facts in the record, that “what happened to plaintiff here is standard operating procedure for defendant[s]” is insufficient to meet Rule 9(b)’s heightened pleading requirements.[11] (ECF. No. 39 at 8).

Although it is not apparent how Hopkins can cure the deficiencies in his RICO claim, the policy of granting leave to amend “is to be applied with extreme liberality.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001). “In determining whether leave to amend is appropriate, the district court considers `the presence of any of four factors: bad faith, undue delay, prejudice to the opposing party, and/or futility.'” Id. (quoting Griggs v. Pace Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999)). Although Hopkins’ failure to abide by local rules and comply with a prior court order caused delay in these proceedings, see Order Denying Motion to Stay and Directing Plaintiff to File Responses to Defendants’ Motions to Dismiss and Strike, Dec. 11, 2013 (ECF No. 18), and although it is uncertain if Hopkins can successfully amend his claim, that prospect, at this juncture, cannot be deemed “futile.” See Allen v. City of Beverly Hills, 911 F.2d 367, 374 (9th Cir. 1990). Accordingly, the RICO claim is dismissed with leave to amend.

C. Plaintiff’s Remaining Claims

Hopkins’ only remaining federal claim is the thirteenth claim for relief against ABC for violation of the Truth in Lending Act (TILA). While not raised by the parties, it appears that Hopkins’ TILA claim also suffers from significant deficiencies. In particular, Hopkins’ prayer for relief is premised upon an alleged “continuing right to rescind all loans . . . pursuant to 15 U.S.C. § 1635(a) and Regulation Z 12 C.F.R. § 226.23(a)(3).” (FAC, at ¶ 108). Hopkins’ home loan, however, evidently is a “residential mortgage transaction,” which is specifically exempted from the operation of the aforementioned sections.[12] 15 U.S.C. § 1635(e); 12 C.F.R. § 226.23(f). Moreover, barring exceptions not applicable here, any right of rescission Hopkins held expired under the statute in October 2009. 15 U.S.C. § 1635(f) (“An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor[.]”). Therefore, Hopkins is ordered to show cause why his TILA claim should not also be dismissed. Considering the extent of the state court’s prior involvement in this litigation, if Hopkins is unable to state a federal claim, this action will be remanded to the Alameda County Superior Court.

V. CONCLUSION

For the aforementioned reasons, defendants’ motions to dismiss are GRANTED in part. Hopkins’ RESPA claims are dismissed with prejudice and his RICO claims are dismissed with leave to amend. If plaintiff wishes to amend his complaint, he must refile within thirty (30) days of this order. Hopkins is further ordered to show cause within thirty (30) days why his TILA claim against ABC should not be dismissed. Hopkins’ further filings, if any, must comply with the Federal Rules of Civil Procedure and the Civil Local Rules of the Northern District of California.

IT IS SO ORDERED.

[1] This order does not reach Citibank’s motion to strike. If plaintiff substantiates a basis for federal jurisdiction, Citibank’s motion to strike will be resolved at a later date.

[2] AHMSI is now known as Homeward Residential, Inc. Because most filings refer to Homeward as AHMSI, that acronym will be used here.

[3] Although Hopkins titled his opposition to Citibank’s motions “Plaintiff Donald Ray Hopkins’ Memorandum of Points and Authorities in Opposition to Defendant Citibank’s Motions to Dismiss/Strike Fourth Amended Complaint[,]” he did not offer any substantive opposition to Citibank’s motion to strike. (See ECF No. 40).

[4] Hopkins’ allegations may also fit within § 1962(d). Because Hopkins’ claim under § 1962(d) depends on his § 1962(c) claim, the analysis is restricted to § 1962(c). See Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007).

[5] Hopkins also alleges “unlawful dealings in violation of 18 U.S.C. Sections 1961, 1962 and their sub parts.” (FAC at ¶ 137). The term “unlawful dealings” does not appear in the RICO statute, nor does it identify a cognizable legal theory on which plaintiff could base his claim.

[6] Hopkins suggests in his opposition that defendants’ alleged RESPA violations are relevant to his RICO claim. (ECF No. 39 at 9). RESPA violations, however, are not predicate acts included in the statutory definition and Hopkins offers no authority or explanation why the alleged violations should be considered “racketeering activity.” See 18 U.S.C. § 1961(1). Hopkins also alleges that defendants engaged in predatory loan practices. (FAC at ¶¶ 130-145). Hopkins concedes that neither AHMSI nor Citibank originated his home loan. Further, Hopkins has not alleged facts showing AHMSI’s or Citibank’s involvement, if any, in issuing his loan. Consequently, even if these practices are predicate acts, they do not support Hopkins’ RICO claims against AHMSI and Citibank.

[7] Hopkins complaint is inconsistent as to how many payments AHMSI instructed Citibank to cancel.

[8] AHMSI’s Customer Account Activity Statement, attached to the FAC, indicates that Hopkins’ July 2010 through August 2010 payments were eventually applied to his loan, but that the July 2010 payment incurred a late fee. Hopkins’ October 2010 payment was never applied to the mortgage. (FAC, Exb. 3).

[9] The Ninth Circuit in Odom noted that the definition of an enterprise is “not very demanding.” 486 F.3d at 548; Boyle v. United States, 556 U.S. 938, 944 (2009) (“the very concept of an association in fact is expansive”).

[10] Odom specifically overruled prior holdings requiring the associate-in-fact enterprise to have a sufficiently “ascertainable structure, separate and apart from the structure inherent in the conduct of the pattern of racketeering activity.” See Chang v. Chen, 80 F.3d 1293, 1295 (9th Cir. 1996).

[11] Hopkins argues it is clear that defendant’s alleged conduct is typical, because various state Attorneys General Offices have brought actions against AHMSI and because AHMSI was the subject of CBS 60 Minutes “robo-signing” expose. (ECF No. 39 at 8). This evidence is not in the record before the court and is not considered here.

[12] “The term `residential mortgage transaction’ means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling.” 15 U.S.C. § 1602(x).

Boyle v. U.S,. definition of a RICO enterprise

The RICO law is a tough to statute to understand, with multiple requirements and phraseology sometimes difficult to understand. That is particularly true in the definition of a RICO Enterprise. Initially the test seems straightforward. The RICO statute targets group criminal enterprise and a RICO enterprise includes “any union or group of individuals associated in fact although not a legal entity.” But is it sufficient to show the association of a group or must more be demonstrated. The case adopts a broad definition but it is not clear what more than a group involved in criminal conduct generally with the common goal of making money through an unlawful scheme must be shown.

Opinion

Boyle v. U.S. 129 S.Ct. 2237 (2009)

Edmund BOYLE, Petitioner,
v.
UNITED STATES.

No. 07-1309.

Supreme Court of United States.

Argued January 14, 2009.

Decided June 8, 2009.

Justice ALITO delivered the opinion of the Court.

We are asked in this case to decide whether an association-in-fact enterprise under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq., must have “an ascertainable structure beyond that inherent in the pattern of racketeering activity in which it engages.” Pet. for Cert. i. We hold that such an enterprise must have a “structure” but that an instruction framed in this precise language is not necessary. The District Court properly instructed the jury in this case. We therefore affirm the judgment of the Court of Appeals.

I

A

The evidence at petitioner’s trial was sufficient to prove the following: Petitioner and others participated in a series of bank thefts in New York, New Jersey, Ohio, and Wisconsin during the 1990’s. The participants in these crimes included a core group, along with others who were recruited from time to time. Although the participants sometimes attempted bank-vault burglaries and bank robberies, the group usually targeted cash-laden night-deposit boxes, which are often found in banks in retail areas.

Each theft was typically carried out by a group of participants who met beforehand to plan the crime, gather tools (such as crowbars, fishing gaffs, and walkie-talkies), and assign the roles that each participant would play (such as lookout and driver). The participants generally split the proceeds from the thefts. The group was loosely and informally organized. It does not appear to have had a leader or hierarchy; nor does it appear that the participants ever formulated any long-term master plan or agreement.

From 1991 to 1994, the core group was responsible for more than 30 night-deposit-box thefts. By 1994, petitioner had joined the group, and over the next five years, he participated in numerous attempted night-deposit-box thefts and at least two attempted bank-vault burglaries.

In 2003, petitioner was indicted for participation in the conduct of the affairs of an enterprise through a pattern of racketeering activity, in violation of 18 U.S.C. 2242*2242 § 1962(c); conspiracy to commit that offense, in violation of § 1962(d); conspiracy to commit bank burglary, in violation of § 371; and nine counts of bank burglary and attempted bank burglary, in violation of § 2113(a).

B

In instructing the jury on the meaning of a RICO “enterprise,” the District Court relied largely on language in United States v. Turkette, 452 U.S. 576, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). The court told the jurors that, in order to establish the existence of such an enterprise, the Government had to prove that: “(1) There [was] an ongoing organization with some sort of framework, formal or informal, for carrying out its objectives; and (2) the various members and associates of the association function[ed] as a continuing unit to achieve a common purpose.” App. 112. Over petitioner’s objection, the court also told the jury that it could “find an enterprise where an association of individuals, without structural hierarchy, form[ed] solely for the purpose of carrying out a pattern of racketeering acts” and that “[c]ommon sense suggests that the existence of an association-in-fact is oftentimes more readily proven by what it does, rather than by abstract analysis of its structure.” Id., at 111-112.[1]

Petitioner requested an instruction that the Government was required to prove that the enterprise “had an ongoing organization, a core membership that functioned as a continuing unit, and an ascertainable structural hierarchy distinct from the charged predicate acts.” Id., at 95. The District Court refused to give that instruction.

Petitioner was convicted on 11 of the 12 counts against him, including the RICO counts, and was sentenced to 151 months’ imprisonment. In a summary order, the Court of Appeals for the Second Circuit affirmed his conviction but vacated the sentence on a ground not relevant to the issues before us. 283 Fed.Appx. 825 (2007). The Court of Appeals did not specifically address the RICO jury instructions, stating only that the arguments not discussed in the order were “without merit.” Id., at 826. Petitioner was then resentenced, 3 and we granted certiorari, 554 U.S. ___, 129 S.Ct. 29, 171 L.Ed.2d 931 (2008), to resolve conflicts among the Courts of Appeals concerning the meaning of a RICO enterprise.

II

A

RICO makes it “unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.” 18 U.S.C. § 1962(c) (emphasis added).

The statute does not specifically define the outer boundaries of the “enterprise” concept but states that the term “includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” § 1961(4).[2] This enumeration of included enterprises is obviously broad, encompassing “any … group of individuals associated in fact.” Ibid. (emphasis added). The term “any” ensures that the definition has a wide reach, see, e.g., Ali v. Federal Bureau of Prisons, 552 U.S. 214, ___, 128 S.Ct. 831, 833, 169 L.Ed.2d 680 (2008) and the very concept of an association in fact is expansive. In addition, the RICO statute provides that its terms are to be “liberally construed to effectuate its remedial purposes.” § 904(a), 84 Stat. 947, note following 18 U.S.C. § 1961; see also, e.g., National Organization for Women, Inc. v. Scheidler, 510 U.S. 249, 257, 114 S.Ct. 798, 127 L.Ed.2d 99 (1994) (“RICO broadly defines `enterprise'”); Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497, 105 S.Ct. 3275, 87 L.Ed.2d 346(1985) (“RICO is to be read broadly”); Russello v. United States, 464 U.S. 16, 21, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983) (noting “the pattern of the RICO statute in utilizing terms and concepts of breadth”).

In light of these statutory features, we explained in Turkette that “an enterprise includes any union or group of individuals associated in fact” and that RICO reaches “a group of persons associated together for a common purpose of engaging in a course of conduct.” 452 U.S., at 580, 583, 101 S.Ct. 2524. Such an enterprise, we said, “is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” Id., at 583, 101 S.Ct. 2524.

Notwithstanding these precedents, the dissent asserts that the definition of a RICO enterprise is limited to “business-like entities.” See post, at 2247-2250 (opinion of STEVENS, J.). We see no basis to impose such an extratextual requirement.[3]

B

As noted, the specific question on which we granted certiorari is whether an association-in-fact enterprise must have “an ascertainable structure beyond that inherent in the pattern of racketeering activity in which it engages.” Pet. for Cert. i. We will break this question into three parts. First, must an association-in-fact enterprise have a “structure”? Second, must the structure be “ascertainable”? Third, must the “structure” go “beyond that inherent in the pattern of racketeering activity” in which its members engage?

“Structure.” We agree with petitioner that an association-in-fact enterprise must have a structure. In the sense relevant here, the term “structure” means “[t]he way in which parts are arranged or put together to form a whole” and “[t]he interrelation or arrangement of parts in a complex entity.” American Heritage Dictionary 1718 (4th ed.2000); see also Random House Dictionary of the English Language 1410 (1967) (defining structure to mean, among other things, “the pattern of relationships, as of status or friendship, existing among the members of a group or society”).

From the terms of RICO, it is apparent that an association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose. As we succinctly put it in Turkette, an association-in-fact enterprise is “a group of persons associated together for a common purpose of engaging in a course of conduct.” 452 U.S., at 583, 101 S.Ct. 2524.

That an “enterprise” must have a purpose is apparent from meaning of the term in ordinary usage, i.e., a “venture,” “undertaking,” or “project.” Webster’s Third New International Dictionary 757 (1976). The concept of “associat[ion]” requires both interpersonal relationships and a common interest. See id., at 132 (defining “association” as “an organization of persons having a common interest”); Black’s Law Dictionary 156 (rev. 4th ed.1968) (defining “association” as a “collection of persons who have joined together for a certain object”). Section 1962(c) reinforces this conclusion and also shows that an “enterprise” must have some longevity, since the offense proscribed by that provision demands proof that the enterprise had “affairs” of sufficient duration to permit an associate to “participate” in those affairs through “a pattern of racketeering activity.”

Although an association-in-fact enterprise must have these structural features, it does not follow that a district court must use the term “structure” in its jury instructions. A trial judge has considerable discretion in choosing the language of an instruction so long as the substance of the relevant point is adequately expressed.

“Ascertainable.” Whenever a jury is told that it must find the existence of an element beyond a reasonable doubt, that element must be “ascertainable” or else the jury could not find that it was proved. 2245*2245 Therefore, telling the members of the jury that they had to ascertain the existence of an “ascertainable structure” would have been redundant and potentially misleading.

“Beyond that inherent in the pattern of racketeering activity.” This phrase may be interpreted in least two different ways, and its correctness depends on the particular sense in which the phrase is used. If the phrase is interpreted to mean that the existence of an enterprise is a separate element that must be proved, it is of course correct. As we explained in Turkette, the existence of an enterprise is an element distinct from the pattern of racketeering activity and “proof of one does not necessarily establish the other.”[4] 452 U.S., at 583, 101 S.Ct. 2524.

On the other hand, if the phrase is used to mean that the existence of an enterprise may never be inferred from the evidence showing that persons associated with the enterprise engaged in a pattern of racketeering activity, it is incorrect. We recognized in Turkette that the evidence used to prove the pattern of racketeering activity and the evidence establishing an enterprise “may in particular cases coalesce.” Ibid.

C

The crux of petitioner’s argument is that a RICO enterprise must have structural features in addition to those that we think can be fairly inferred from the language of the statute. Although petitioner concedes that an association-in-fact enterprise may be an “`informal'” group and that “not `much'” structure is needed, Reply Brief for Petitioner 24, he contends that such an enterprise must have at least some additional structural attributes, such as a structural “hierarchy,” “role differentiation,” a “unique modus operandi,” a “chain of command,” “professionalism and sophistication of organization,” “diversity and complexity of crimes,” “membership dues, rules and regulations,” “uncharged or additional crimes aside from predicate acts,” an “internal discipline mechanism,” “regular meetings regarding enterprise affairs,” an “enterprise `name,'” and “induction or initiation ceremonies and rituals.” Id., at 31-35; see also Brief for Petitioner 26-28, 33; Tr. of Oral Arg. 6, 8, 17.

We see no basis in the language of RICO for the structural requirements that petitioner asks us to recognize. As we said in Turkette, an association-in-fact enterprise is simply a continuing unit that functions with a common purpose. Such a group need not have a hierarchical structure or a “chain of command”; decisions may be made on an ad hoc basis and by any number of methods—by majority vote, consensus, a show of strength, etc. Members of the group need not have fixed roles; different members may perform different roles at different times. The group need not have a name, regular meetings, dues, established rules and regulations, disciplinary procedures, or induction or initiation ceremonies. While the group must function as a continuing unit and remain in existence long enough to pursue a course of conduct, nothing in RICO exempts an enterprise whose associates engage in spurts of activity punctuated by periods of quiescence. Nor is the statute limited to groups whose crimes are sophisticated, diverse, 2246*2246 complex, or unique; for example, a group that does nothing but engage in extortion through old-fashioned, unsophisticated, and brutal means may fall squarely within the statute’s reach.

The breadth of the “enterprise” concept in RICO is highlighted by comparing the statute with other federal statutes that target organized criminal groups. For example, 18 U.S.C. § 1955(b), which was enacted together with RICO as part of the Organized Crime Control Act of 1970, 84 Stat. 922, defines an “illegal gambling business” as one that “involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business.” A “continuing criminal enterprise,” as defined in 21 U.S.C. § 848(c), must involve more than five persons who act in concert and must have an “organizer,” supervisor, or other manager. Congress included no such requirements in RICO.

III

A

Contrary to petitioner’s claims, rejection of his argument regarding these structural characteristics does not lead to a merger of the crime proscribed by 18 U.S.C. § 1962(c) (participating in the affairs of an enterprise through a pattern of racketeering activity) and any of the following offenses: operating a gambling business, § 1955; conspiring to commit one or more crimes that are listed as RICO predicate offenses, § 371; or conspiring to violate the RICO statute, § 1962(d).

Proof that a defendant violated § 1955 does not necessarily establish that the defendant conspired to participate in the affairs of a gambling enterprise through a pattern of racketeering activity. In order to prove the latter offense, the prosecution must prove either that the defendant committed a pattern of § 1955 violations or a pattern of state-law gambling crimes. See § 1961(1). No such proof is needed to establish a simple violation of § 1955.

Likewise, proof that a defendant conspired to commit a RICO predicate offense—for example, arson—does not necessarily establish that the defendant participated in the affairs of an arson enterprise through a pattern of arson crimes. Under § 371, a conspiracy is an inchoate crime that may be completed in the brief period needed for the formation of the agreement and the commission of a single overt act in furtherance of the conspiracy. See United States v. Feola, 420 U.S. 671, 694, 95 S.Ct. 1255, 43 L.Ed.2d 541 (1975). Section 1962(c) demands much more: the creation of an “enterprise”—a group with a common purpose and course of conduct—and the actual commission of a pattern of predicate offenses.[5]

Finally, while in practice the elements of a violation of §§ 1962(c) and (d) are similar, this overlap would persist even if petitioner’s conception of an association-in-fact enterprise were accepted.

B

Because the statutory language is clear, there is no need to reach petitioner’s remaining arguments based on statutory purpose, legislative history, or the rule of lenity. In prior cases, we have rejected similar arguments in favor of the clear but 2247*2247 expansive text of the statute. See National Organization for Women, 510 U.S., at 262, 114 S.Ct. 798 (“The fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth” (quoting Sedima, 473 U.S., at 499, 105 S.Ct. 3275, brackets and internal quotation marks omitted)); see also Turkette, 452 U.S., at 589-591, 101 S.Ct. 2524. “We have repeatedly refused to adopt narrowing constructions of RICO in order to make it conform to a preconceived notion of what Congress intended to proscribe.” Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. ___, ___, 128 S.Ct. 2131, 2145, 170 L.Ed.2d 1012 (2008); see also, e.g., National Organization for Women, supra, at 252, 114 S.Ct. 798 (rejecting the argument that “RICO requires proof that either the racketeering enterprise or the predicate acts of racketeering were motivated by an economic purpose”); H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 244, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989) (declining to read “an organized crime limitation into RICO’s pattern concept”); Sedima, supra, at 481, 105 S.Ct. 3275 (rejecting the view that RICO provides a private right of action “only against defendants who had been convicted on criminal charges, and only where there had occurred a `racketeering injury'”).

IV

The instructions the District Court judge gave to the jury in this case were correct and adequate. These instructions explicitly told the jurors that they could not convict on the RICO charges unless they found that the Government had proved the existence of an enterprise. See App. 111. The instructions made clear that this was a separate element from the pattern of racketeering activity. Ibid.

The instructions also adequately told the jury that the enterprise needed to have the structural attributes that may be inferred from the statutory language. As noted, the trial judge told the jury that the Government was required to prove that there was “an ongoing organization with some sort of framework, formal or informal, for carrying out its objectives” and that “the various members and associates of the association function[ed] as a continuing unit to achieve a common purpose.” Id., at 112.

Finally, the trial judge did not err in instructing the jury that “the existence of an association-in-fact is oftentimes more readily proven by what it does, rather than by abstract analysis of its structure.” Id., at 111-112. This instruction properly conveyed the point we made in Turkette that proof of a pattern of racketeering activity may be sufficient in a particular case to permit a jury to infer the existence of an association-in-fact enterprise.

We therefore affirm the judgment of the Court of Appeals.

It is so ordered.

Justice STEVENS, with whom Justice BREYER joins, dissenting.

In my view, Congress intended the term “enterprise” as it is used in the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq., to refer only to business-like entities that have an existence apart from the predicate acts committed by their employees or associates. The trial judge in this case committed two significant errors relating to the meaning of that term. First, he instructed the jury that “an association of individuals, without structural hierarchy, form[ed] solely for the purpose of carrying out a pattern of racketeering acts” can constitute an enterprise. App. 112. And he 2248*2248 allowed the jury to find that element satisfied by evidence showing a group of criminals with no existence beyond its intermittent commission of racketeering acts and related offenses. Because the Court’s decision affirming petitioner’s conviction is inconsistent with the statutory meaning of the term enterprise and serves to expand RICO liability far beyond the bounds Congress intended, I respectfully dissent.

I

RICO makes it “unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.” § 1962(c). The statute defines “enterprise” to include “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” § 1961(4).

It is clear from the statute and our earlier decisions construing the term that Congress used “enterprise” in these provisions in the sense of “a business organization,” Webster’s Third New International Dictionary 757 (1976), rather than “a `venture,’ `undertaking,’ or `project,'” ante, at 2244 (quoting Webster’s Third New International Dictionary, at 757). First, the terms “individual, partnership, corporation, association, or other legal entity” describe entities with formal legal structures most commonly established for business purposes. § 1961(4). In context, the subsequent reference to any “union or group of individuals associated in fact although not a legal entity” reflects an intended commonality between the legal and nonlegal entities included in the provision. Ibid. (emphasis added). “The juxtaposition of the two phrases suggests that `associated in fact’ just means structured without the aid of legally defined structural forms such as the business corporation.” Limestone Development Corp. v. Lemont, 520 F.3d 797, 804-805 (C.A.7 2008).[1]

That an enterprise must have business-like characteristics is confirmed by the text of § 1962(c) and our decision in Reves v. Ernst & Young, 507 U.S. 170, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993). Section 1962(c) creates liability for “conduct[ing] or participat[ing] … in the conduct of [an] enterprise’s affairs through a pattern of racketeering activity.” In Reves, we examined that provision’s meaning and held that, “[i]n order to `participate, directly or indirectly, in the conduct of such enterprise’s affairs,’ one must have some part in directing those affairs.” Id., at 179, 113 S.Ct. 1163 (quoting § 1962(c)). It is not enough for a defendant to “carry on” or “participate in” an enterprise’s affairs 2249*2249 through a pattern of racketeering activity; instead, evidence that he operated, managed, or directed those affairs is required. See id., at 177-179, 113 S.Ct. 1163. This requirement confirms that the enterprise element demands evidence of a certain quantum of business-like organization— i.e., a system of processes, dealings, or other affairs that can be “directed.”

Our cases also make clear that an enterprise “is an entity separate and apart from the pattern of activity in which it engages.” United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). As with the requirement that an enterprise have business-like characteristics, that an enterprise must have a separate existence is confirmed by § 1962(c) and Reves. If an entity’s existence consisted solely of its members’ performance of a pattern of racketeering acts, the “enterprise’s affairs” would be synonymous with the “pattern of racketeering activity.” Section 1962(c) would then prohibit an individual from conducting or participating in “the conduct of [a pattern of racketeering activity] through a pattern of racketeering activity”—a reading that is unbearably redundant, particularly in a case like this one in which a single pattern of activity is alleged. The only way to avoid that result is to require that an “enterprise’s affairs” be something other than the pattern of racketeering activity undertaken by its members.[2]

Recognizing an enterprise’s business-like nature and its distinctness from the pattern of predicate acts, however, does not answer the question of what proof each element requires. In cases involving a legal entity, the matter of proving the enterprise element is straightforward, as the entity’s legal existence will always be something apart from the pattern of activity performed by the defendant or his associates. Cf. Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 163, 121 S.Ct. 2087, 150 L.Ed.2d 198 (2001). But in the case of an association-in-fact enterprise, the Government must adduce other evidence of the entity’s “separate” existence and “ongoing organization.” Turkette, 452 U.S., at 583, 101 S.Ct. 2524. There may be cases in which a jury can infer that existence and continuity from the evidence used to establish the pattern of racketeering activity. Ibid. But that will be true only when the pattern of activity is so complex that it could not be performed in the absence of structures or processes for planning or concealing the illegal conduct beyond those inherent in performing the predicate acts. More often, proof of an enterprise’s separate existence will require different evidence from that used to establish the pattern of predicate acts.

Precisely what proof is required in each case is a more difficult question, largely 2250*2250 due to the abundant variety of RICO predicates and enterprises. Because covered enterprises are necessarily business-like in nature, however, proof of an association-in-fact enterprise’s separate existence will generally require evidence of rules, routines, or processes through which the entity maintains its continuing operations and seeks to conceal its illegal acts. As petitioner suggests, this requirement will usually be satisfied by evidence that the association has an “ascertainable structure beyond that inherent in the pattern of racketeering activity in which it engages.” Pet. for Cert. i. Examples of such structure include an organizational hierarchy, a “framework for making decisions,” an “internal discipline mechanism,” “regular meetings,” or a practice of “reinvest[ing] proceeds to promote and expand the enterprise.” Reply Brief for Petitioner 31-34. In other cases, the enterprise’s existence might be established through evidence that it provides goods or services to third parties, as such an undertaking will require organizational elements more comprehensive than those necessary to perform a pattern of predicate acts. Thus, the evidence needed to establish an enterprise will vary from case to case, but in every case the Government must carry its burden of proving that an alleged enterprise has an existence separate from the pattern of racketeering activity undertaken by its constituents.

II

In some respects, my reading of the statute is not very different from that adopted by the Court. We agree that “an association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Ante, at 2244. But the Court stops short of giving content to that requirement. It states only that RICO “demands proof that the enterprise had `affairs’ of sufficient duration to permit an associate to `participate’ in those affairs through `a pattern of racketeering activity,'” before concluding that “[a] trial judge has considerable discretion in choosing the language of an instruction” and need not use the term “structure.” Ante, at 2244. While I agree the word structure is not talismanic, I would hold that the instructions must convey the requirement that the alleged enterprise have an existence apart from the alleged pattern of predicate acts. The Court’s decision, by contrast, will allow juries to infer the existence of an enterprise in every case involving a pattern of racketeering activity undertaken by two or more associates.

By permitting the Government to prove both elements with the same evidence, the Court renders the enterprise requirement essentially meaningless in association-in-fact cases. It also threatens to make that category of § 1962(c) offenses indistinguishable from conspiracies to commit predicate acts, see § 371, as the only remaining difference is § 1962(c)’s pattern requirement. The Court resists this criticism, arguing that § 1962(c) “demands much more” than the inchoate offense defined in § 371. Ante, at 2246. It states that the latter “may be completed in the brief period needed for the formation of the agreement and the commission of a single overt act in furtherance of the conspiracy,” whereas the former requires the creation of “a group with a common purpose and course of conduct—and the actual commission of a pattern of predicate offenses.” Ibid. Given that it is also unlawful to conspire to violate § 1962(c), see § 1962(d), this comment provides no assurance that RICO and § 371 offenses remain distinct. Only if proof of the enterprise element—the “group with a common purpose 2251*2251 and course of conduct”—requires evidence of activity or organization beyond that inherent in the pattern of predicate acts will RICO offenses retain an identity distinct from § 371 offenses.

This case illustrates these concerns. The trial judge instructed the jury that an enterprise need have only the degree of organization necessary “for carrying out its objectives” and that it could “find an enterprise where an association of individuals, without structural hierarchy, forms solely for the purpose of carrying out a pattern of racketeering acts.” App. 112.[3] These instructions were plainly deficient, as they did not require the Government to prove that the alleged enterprise had an existence apart from the pattern of predicate acts. Instead, they permitted the Government’s proof of the enterprise’s structure and continuing nature—requirements on which all agree—to consist only of evidence that petitioner and his associates performed a pattern of racketeering activity.

Petitioner’s requested instruction would have required the jury to find that the alleged enterprise “had an ongoing organization, a core membership that functioned as a continuing unit, and an ascertainable structural hierarchy distinct from the charged predicate acts.” Id., at 95. That instruction does not precisely track my understanding of the statute; although evidence of “structural hierarchy” can evidence an enterprise, it is not necessary to establish that element. Nevertheless, the proposed instruction would have better directed the jury to consider whether the alleged enterprise possessed the separate existence necessary to expose petitioner to liability under § 1962(c), and the trial judge should have considered an instruction along those lines.

The trial judge also erred in finding the Government’s evidence in this case sufficient to support petitioner’s RICO convictions. Petitioner was alleged to have participated and conspired to participate in the conduct of an enterprise’s affairs through a pattern of racketeering activity consisting of one act of bank robbery and three acts of interstate transportation of stolen funds. Id., at 15-19. The “primary goals” of the alleged enterprise “included generating money for its members and associates through the commission of criminal activity, including bank robberies, bank burglaries and interstate transportation of stolen money.” Id., at 14. And its modus operandi was to congregate periodically when an associate had a lead on a night-deposit box that the group could break into. Whoever among the associates was available would bring screwdrivers, crowbars, and walkie-talkies to the location. Some acted as lookouts, while others retrieved the money. When the endeavor was successful, the participants would split the proceeds. Thus, the group’s purpose and activities, and petitioner’s participation therein, were limited to sporadic acts of taking money from bank deposit boxes. There is no evidence in RICO’s text or history that Congress intended it to reach such ad hoc associations of thieves.

III

Because the instructions and evidence in this case did not satisfy the requirement that an alleged enterprise have an existence separate and apart from the pattern of activity in which it engages, I respectfully dissent.

[1] The relevant portion of the instructions was as follows:

“The term `enterprise’ as used in these instructions may also include a group of people associated in fact, even though this association is not recognized as a legal entity. Indeed, an enterprise need not have a name. Thus, an enterprise need not be a form[al] business entity such as a corporation, but may be merely an informal association of individuals. A group or association of people can be an `enterprise’ if, among other requirements, these individuals `associate’ together for a purpose of engaging in a course of conduct. Common sense suggests that the existence of an association-in-fact is oftentimes more readily proven by what it does, rather than by abstract analysis of its structure.

“Moreover, you may find an enterprise where an association of individuals, without structural hierarchy, forms solely for the purpose of carrying out a pattern of racketeering acts. Such an association of persons may be established by evidence showing an ongoing organization, formal or informal, and … by evidence that the people making up the association functioned as a continuing unit. Therefore, in order to establish the existence of such an enterprise, the government must prove that: (1) There is an ongoing organization with some sort of framework, formal or informal, for carrying out its objectives; and (2) the various members and associates of the association function as a continuing unit to achieve a common purpose.

“Regarding `organization,’ it is not necessary that the enterprise have any particular or formal structure, but it must have sufficient organization that its members functioned and operated in a coordinated manner in order to carry out the alleged common purpose or purposes of the enterprise.” App. 111-113 (emphasis added).

[2] This provision does not purport to set out an exhaustive definition of the term “enterprise.” Compare §§ 1961(1)-(2) (defining what the terms “racketeering activity” and “State” mean) with §§ 1961(3)-(4) (defining what the terms “person” and “enterprise” include). Accordingly, this provision does not foreclose the possibility that the term might include, in addition to the specifically enumerated entities, others that fall within the ordinary meaning of the term “enterprise.” See H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 238, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989) (explaining that the term “pattern” also retains its ordinary meaning notwithstanding the statutory definition in § 1961(5)).

[3] The dissent claims that the “business-like” limitation “is confirmed by the text of § 1962(c) and our decision in Reves v. Ernst & Young, 507 U.S. 170, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993).” Post, at 2248. Section 1962(c), however, states only that one may not “conduct or participate, directly or indirectly, in the conduct of [an] enterprise’s affairs through a pattern of racketeering activity.” Whatever business-like characteristics the dissent has in mind, we do not see them in § 1962(c). Furthermore, Reves v. Ernst & Young, 507 U.S. 170, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993), is inapposite because that case turned on our interpretation of the participation requirement of § 1962, not the definition of “enterprise.” See id., at 184-185, 113 S.Ct. 1163. In any case, it would be an interpretive stretch to deduce from the requirement that an enterprise must be “directed” to impose the much broader, amorphous requirement that it be “business-like.”

[4] It is easy to envision situations in which proof that individuals engaged in a pattern of racketeering activity would not establish the existence of an enterprise. For example, suppose that several individuals, independently and without coordination, engaged in a pattern of crimes listed as RICO predicates—for example, bribery or extortion. Proof of these patterns would not be enough to show that the individuals were members of an enterprise.

[5] The dissent states that “[o]nly if proof of the enterprise element … requires evidence of activity or organization beyond that inherent in the pattern of predicate acts will RICO offenses retain an identity distinct from § 371 offenses.” Post, at 2250-2251 (opinion of STEVENS, J.). This is incorrect: Even if the same evidence may prove two separate elements, this does not mean that the two elements collapse into one.

[1] To be sure, we have read RICO’s enterprise term broadly to include entities with exclusively noneconomic motives or wholly unlawful purposes. See National Organization for Women, Inc. v. Scheidler, 510 U.S. 249, 252, 114 S.Ct. 798, 127 L.Ed.2d 99 (1994) (NOW); United States v. Turkette, 452 U.S. 576, 580-581, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). But those holdings are consistent with the conclusion that an enterprise is a business-like entity. Indeed, the examples of qualifying associations cited in Turkette—including loan-sharking, property-fencing, drug-trafficking, and counterfeiting operations—satisfy that criterion, as each describes an organization with continuing operations directed toward providing goods or services to its customers. See id., at 589-590, 101 S.Ct. 2524 (citing 84 Stat. 923; 116 Cong. Rec. 592 (1970)). Similarly, the enterprise at issue in NOW was a nationwide network of antiabortion groups that had a leadership counsel and regular conferences and whose members undertook an extensive pattern of extortion, arson, and other racketeering activity for the purpose of “shut[ting] down abortion clinics.” 510 U.S., at 253, 114 S.Ct. 798.

[2] The other subsections of 18 U.S.C. § 1962 further demonstrate the business-like nature of the enterprise element and its necessary distinctness from the pattern of racketeering activity. Subsection (a) prohibits anyone who receives income derived from a pattern of racketeering activity from “us[ing] or invest[ing], directly or indirectly, any part of such income … in acquisition of any interest in, or the establishment or operation of, any enterprise.” And subsection (b) prohibits anyone from “acquir[ing] or maintain[ing]” any interest in or control of an enterprise through a pattern of racketeering activity. We noted in NOW that the term enterprise “plays a different role in the structure” of those subsections than it does in subsection (c) because the enterprise in those subsections is the victim. 510 U.S., at 258-259, 114 S.Ct. 798. We did not, however, suggest that the term has a substantially different meaning in each subsection. To the contrary, our observation that the enterprise in subsection (c) is “the vehicle through which the unlawful pattern of racketeering activity is committed,” id., at 259, 114 S.Ct. 798, indicates that, as in subsections (a) and (b), the enterprise must have an existence apart from the pattern of racketeering activity.

[3] For the full text of the relevant portion of the instructions, see ante, at 2242, n. 1.

Anza v. Ideal Steel- competitor cannot sue under RICO

Anza v. Ideal Steel Supply, 547 U.S. 451 (2006)
Plaintiff’s competitor allegedly failed to charge sales tax on many transactions, giving it an advantage. The Court rejected the claim finding several problems. The Court suggested precedent required “limiting recovery to direct victims.” Causation was another issue, “Ideal’s lost sales could have resulted from factors other than petitioners’ alleged acts of fraud. Businesses lose and gain customers for many reasons, and it would require a complex assessment to establish what portion of Ideal’s lost sales were the product of National’s decreased prices.”

Decision
__________
ANZA et al.
v.
IDEAL STEEL SUPPLY CORP.

No. 04-433.

Supreme Court of United States.

Argued March 27, 2006.

Decided June 5, 2006.

David C. Frederick argued the cause for petitioners. With him on the briefs were Richard L. Huffman, William M. Brodsky, and V. David Rivkin.

Kevin P. Roddy argued the cause and filed a brief for respondent.[*]

JUSTICE KENNEDY delivered the opinion of the Court.

The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U. S. C. §§ 1961-1968 (2000 ed. and Supp. III), prohibits certain conduct involving a “pattern of racketeering activity.” § 1962 (2000 ed.). One of RICO’s enforcement mechanisms is a private right of action, available to “[a]ny person injured in his business or property by reason of a violation” of RICO’s substantive restrictions. § 1964(c).

In Holmes v. Securities Investor Protection Corporation, 503 U. S. 258, 268 (1992), this Court held that a plaintiff may sue under § 1964(c) only if the alleged RICO violation was the proximate cause of the plaintiff’s injury. The instant case requires us to apply the principles discussed in Holmes to a dispute between two competing businesses.

I

Because this case arises from a motion to dismiss, we accept as true the factual allegations in the amended complaint. See Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U. S. 163, 164 (1993).

Respondent Ideal Steel Supply Corporation (Ideal) sells steel mill products along with related supplies and services. It operates two store locations in New York, one in Queens and the other in the Bronx. Petitioner National Steel Supply, Inc. (National), owned by petitioners Joseph and Vincent Anza, is Ideal’s principal competitor. National offers a similar array of products and services, and it, too, operates one store in Queens and one in the Bronx.

Ideal sued petitioners in the United States District Court for the Southern District of New York. It claimed petitioners were engaged in an unlawful racketeering scheme aimed at “gain[ing] sales and market share at Ideal’s expense.” App. 7. According to Ideal, National adopted a practice of failing to charge the requisite New York sales tax to cashpaying customers, even when conducting transactions that were not exempt from sales tax under state law. This practice allowed National to reduce its prices without affecting its profit margin. Petitioners allegedly submitted fraudulent tax returns to the New York State Department of Taxation and Finance in an effort to conceal their conduct.

Ideal’s amended complaint contains, as relevant here, two RICO claims. The claims assert that petitioners, by submitting the fraudulent tax returns, committed various acts of mail fraud (when they sent the returns by mail) and wire fraud (when they sent them electronically). See 18 U. S. C. §§ 1341, 1343 (2000 ed., Supp. III). Mail fraud and wire fraud are forms of “racketeering activity” for purposes of RICO. § 1961(1)(B). Petitioners’ conduct allegedly constituted a “pattern of racketeering activity,” see § 1961(5) (2000 ed.), because the fraudulent returns were submitted on an ongoing and regular basis.

Ideal asserts in its first cause of action that Joseph and Vincent Anza violated § 1962(c), which makes it unlawful for “any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.” The complaint states that the Anzas’ goal, which they achieved, was to give National a competitive advantage over Ideal.

The second cause of action is asserted against all three petitioners. It alleges a violation of § 1962(a), which makes it unlawful for any person who has received income derived from a pattern of racketeering activity “to use or invest” that income “in acquisition of any interest in, or the establishment or operation of,” an enterprise engaged in or affecting interstate or foreign commerce. As described in the complaint, petitioners used funds generated by their fraudulent tax scheme to open National’s Bronx location. The opening of this new facility caused Ideal to lose “significant business and market share.” App. 18.

Petitioners moved to dismiss Ideal’s complaint under Federal Rules of Civil Procedure 12(b)(6) and 9(b). The District Court granted the Rule 12(b)(6) motion, holding that the complaint failed to state a claim upon which relief could be granted. The court began from the proposition that to assert a RICO claim predicated on mail fraud or wire fraud, a plaintiff must have relied on the defendant’s misrepresentations. Ideal not having alleged that it relied on petitioners’ false tax returns, the court concluded Ideal could not go forward with its RICO claims.

Ideal appealed, and the Court of Appeals for the Second Circuit vacated the District Court’s judgment. 373 F. 3d 251 (2004). Addressing Ideal’s § 1962(c) claim, the court held that where a complaint alleges a pattern of racketeering activity “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.” Id., at 263. This is the case, the court explained, “even where the scheme depended on fraudulent communications directed to and relied on by a third party rather than the plaintiff.” Ibid.

The court reached the same conclusion with respect to Ideal’s § 1962(a) claim. It reasoned that Ideal adequately pleaded its claim because it alleged an injury by reason of petitioners’ use and investment of racketeering proceeds, “as distinct from injury traceable simply to the predicate acts of racketeering alone or to the conduct of the business of the enterprise.” Id., at 264.

We granted certiorari. 546 U. S. 1029 (2005).

II

Our analysis begins—and, as will become evident, largely ends—with Holmes. That case arose from a complaint filed by the Securities Investor Protection Corporation (SIPC), a private corporation with a duty to reimburse the customers of registered broker-dealers who became unable to meet their financial obligations. SIPC claimed that the petitioner, Robert Holmes, conspired with others to manipulate stock prices. When the market detected the fraud, the share prices plummeted, and the “decline caused [two] broker-dealers’ financial difficulties resulting in their eventual liquidation and SIPC’s advance of nearly $13 million to cover their customers’ claims.” 503 U. S., at 262, 263. SIPC sued on several theories, including that Holmes participated in the conduct of an enterprise’s affairs through a pattern of racketeering activity in violation of § 1962(c) and conspired to do so in violation of § 1962(d).

The Court held that SIPC could not maintain its RICO claims against Holmes for his alleged role in the scheme. The decision relied on a careful interpretation of § 1964(c), which provides a civil cause of action to persons injured “by reason of” a defendant’s RICO violation. The Court recognized the phrase “by reason of” could be read broadly to require merely that the claimed violation was a “but for” cause of the plaintiff’s injury. Id., at 265-266. It rejected this reading, however, noting the “unlikelihood that Congress meant to allow all factually injured plaintiffs to recover.” Id., at 266.

Proper interpretation of § 1964(c) required consideration of the statutory history, which revealed that “Congress modeled § 1964(c) on the civil-action provision of the federal anti-trust laws, § 4 of the Clayton Act.” Id., at 267. In Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U. S. 519 (1983), the Court held that “a plaintiff’s right to sue under § 4 required a showing that the defendant’s violation not only was a `but for’ cause of his injury, but was the proximate cause as well.” Holmes, supra, at 268 (citing Associated Gen. Contractors, supra, at 534). This reasoning, the Court noted in Holmes, “applies just as readily to § 1964(c).” 503 U. S., at 268.

The Holmes Court turned to the common-law foundations of the proximate-cause requirement, and specifically the “demand for some direct relation between the injury asserted and the injurious conduct alleged.” Ibid. It concluded that even if SIPC were subrogated to the rights of certain aggrieved customers, the RICO claims could not satisfy this requirement of directness. The deficiency, the Court explained, was that “the link is too remote between the stock manipulation alleged and the customers’ harm, being purely contingent on the harm suffered by the broker-dealers.” Id., at 271.

Applying the principles of Holmes to the present case, we conclude Ideal cannot maintain its claim based on § 1962(c). Section 1962(c), as noted above, forbids conducting or participating in the conduct of an enterprise’s affairs through a pattern of racketeering activity. The Court has indicated the compensable injury flowing from a violation of that provision “necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern, for the essence of the violation is the commission of those acts in connection with the conduct of an enterprise.” Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479, 497 (1985).

Ideal’s theory is that Joseph and Vincent Anza harmed it by defrauding the New York tax authority and using the proceeds from the fraud to offer lower prices designed to attract more customers. The RICO violation alleged by Ideal is that the Anzas conducted National’s affairs through a pattern of mail fraud and wire fraud. The direct victim of this conduct was the State of New York, not Ideal. It was the State that was being defrauded and the State that lost tax revenue as a result.

The proper referent of the proximate-cause analysis is an alleged practice of conducting National’s business through a pattern of defrauding the State. To be sure, Ideal asserts it suffered its own harms when the Anzas failed to charge customers for the applicable sales tax. The cause of Ideal’s asserted harms, however, is a set of actions (offering lower prices) entirely distinct from the alleged RICO violation (defrauding the State). The attenuation between the plaintiff’s harms and the claimed RICO violation arises from a different source in this case than in Holmes, where the alleged violations were linked to the asserted harms only through the broker-dealers’ inability to meet their financial obligations. Nevertheless, the absence of proximate causation is equally clear in both cases.

This conclusion is confirmed by considering the directness requirement’s underlying premises. See 503 U. S., at 269-270. One motivating principle is the difficulty that can arise when a court attempts to ascertain the damages caused by some remote action. See id., at 269 (“[T]he less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff’s damages attributable to the violation, as distinct from other, independent, factors”). The instant case is illustrative. The injury Ideal alleges is its own loss of sales resulting from National’s decreased prices for cashpaying customers. National, however, could have lowered its prices for any number of reasons unconnected to the asserted pattern of fraud. It may have received a cash inflow from some other source or concluded that the additional sales would justify a smaller profit margin. Its lowering of prices in no sense required it to defraud the state tax authority. Likewise, the fact that a company commits tax fraud does not mean the company will lower its prices; the additional cash could go anywhere from asset acquisition to research and development to dividend payouts. Cf. id., at 271 (“The broker-dealers simply cannot pay their bills, and only that intervening insolvency connects the conspirators’ acts to the losses suffered by the nonpurchasing customers and general creditors”).

There is, in addition, a second discontinuity between the RICO violation and the asserted injury. Ideal’s lost sales could have resulted from factors other than petitioners’ alleged acts of fraud. Businesses lose and gain customers for many reasons, and it would require a complex assessment to establish what portion of Ideal’s lost sales were the product of National’s decreased prices. Cf. id., at 272-273 (“If the nonpurchasing customers were allowed to sue, the district court would first need to determine the extent to which their inability to collect from the broker-dealers was the result of the alleged conspiracy to manipulate, as opposed to, say, the broker-dealers’ poor business practices or their failures to anticipate developments in the financial markets”).

The attenuated connection between Ideal’s injury and the Anzas’ injurious conduct thus implicates fundamental concerns expressed in Holmes. Notwithstanding the lack of any appreciable risk of duplicative recoveries, which is another consideration relevant to the proximate-cause inquiry, see id., at 269, these concerns help to illustrate why Ideal’s alleged injury was not the direct result of a RICO violation. Further illustrating this point is the speculative nature of the proceedings that would follow if Ideal were permitted to maintain its claim. A court considering the claim would need to begin by calculating the portion of National’s price drop attributable to the alleged pattern of racketeering activity. It next would have to calculate the portion of Ideal’s lost sales attributable to the relevant part of the price drop. 460*460 The element of proximate causation recognized in Holmes is meant to prevent these types of intricate, uncertain inquiries from overrunning RICO litigation. It has particular resonance when applied to claims brought by economic competitors, which, if left unchecked, could blur the line between RICO and the antitrust laws.

The requirement of a direct causal connection is especially warranted where the immediate victims of an alleged RICO violation can be expected to vindicate the laws by pursuing their own claims. See id., at 269-270 (“[D]irectly injured victims can generally be counted on to vindicate the law as private attorneys general, without any of the problems attendant upon suits by plaintiffs injured more remotely”). Again, the instant case is instructive. Ideal accuses the Anzas of defrauding the State of New York out of a substantial amount of money. If the allegations are true, the State can be expected to pursue appropriate remedies. The adjudication of the State’s claims, moreover, would be relatively straightforward; while it may be difficult to determine facts such as the number of sales Ideal lost due to National’s tax practices, it is considerably easier to make the initial calculation of how much tax revenue the Anzas withheld from the State. There is no need to broaden the universe of actionable harms to permit RICO suits by parties who have been injured only indirectly.

The Court of Appeals reached a contrary conclusion, apparently reasoning that because the Anzas allegedly sought to gain a competitive advantage over Ideal, it is immaterial whether they took an indirect route to accomplish their goal. See 373 F. 3d, at 263. This rationale does not accord with Holmes. A RICO plaintiff cannot circumvent the proximate-cause requirement simply by claiming that the defendant’s aim was to increase market share at a competitor’s expense. See Associated Gen. Contractors, 459 U. S., at 537 (“We are also satisfied that an allegation of improper motive 461*461. . . is not a panacea that will enable any complaint to withstand a motion to dismiss”). When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff’s injuries. In the instant case, the answer is no. We hold that Ideal’s § 1962(c) claim does not satisfy the requirement of proximate causation.

Petitioners alternatively ask us to hold, in line with the District Court’s decision granting petitioners’ motion to dismiss, that a plaintiff may not assert a RICO claim predicated on mail fraud or wire fraud unless it demonstrates it relied on the defendant’s misrepresentations. They argue that RICO’s private right of action must be interpreted in light of common-law principles, and that at common law a fraud action requires the plaintiff to prove reliance. Because Ideal has not satisfied the proximate-cause requirement articulated in Holmes, we have no occasion to address the substantial question whether a showing of reliance is required. Cf. 503 U. S., at 275-276.

III

The amended complaint also asserts a RICO claim based on a violation of § 1962(a). The claim alleges petitioners’ tax scheme provided them with funds to open a new store in the Bronx, which attracted customers who otherwise would have purchased from Ideal.

In this Court petitioners contend that the proximate-cause analysis should function identically for purposes of Ideal’s § 1962(c) claim and its § 1962(a) claim. (Petitioners also contend that “a civil RICO plaintiff does not plead an injury proximately caused by a violation of § 1962(a) merely by alleging that a corporate defendant reinvested profits back into itself,” Brief for Petitioners 20, n. 5, but this argument has not been developed, and we decline to address it.) It is true that private actions for violations of § 1962(a), like actions for violations of § 1962(c), must be asserted under 462*462 § 1964(c). It likewise is true that a claim is cognizable under § 1964(c) only if the defendant’s alleged violation proximately caused the plaintiff’s injury. The proximate-cause inquiry, however, requires careful consideration of the “relation between the injury asserted and the injurious conduct alleged.” Holmes, supra, at 268. Because § 1962(c) and § 1962(a) set forth distinct prohibitions, it is at least debatable whether Ideal’s two claims should be analyzed in an identical fashion for proximate-cause purposes.

The Court of Appeals held that Ideal adequately pleaded its § 1962(a) claim, see 373 F. 3d, at 264, but the court did not address proximate causation. We decline to consider Ideal’s § 1962(a) claim without the benefit of the Court of Appeals’ analysis, particularly given that the parties have devoted nearly all their attention in this Court to the § 1962(c) claim. We therefore vacate the Court of Appeals’ judgment with respect to Ideal’s § 1962(a) claim. On remand, the court should determine whether petitioners’ alleged violation of § 1962(a) proximately caused the injuries Ideal asserts.

* * *

The judgment of the Court of Appeals is reversed in part and vacated in part. The case is remanded for further proceedings consistent with this opinion.

It is so ordered.

JUSTICE SCALIA, concurring.

I join the opinion of the Court. I also note that it is inconceivable that the injury alleged in the 18 U. S. C. § 1962(c) claim at issue here is within the zone of interests protected by the RICO cause of action for fraud perpetrated upon New York State. See Holmes v. Securities Investor Protection Corporation, 503 U. S. 258, 286-290 (1992) (Scalia, J., concurring in judgment).

JUSTICE THOMAS, concurring in part and dissenting in part.

The Court today limits the lawsuits that may be brought under the civil enforcement provision of the Racketeer Influenced and Corrupt Organizations Act (RICO or Act), 18 U. S. C. § 1961 et seq. (2000 ed. and Supp. III), by adopting a theory of proximate causation that is supported neither by the Act nor by our decision in Holmes v. Securities Investor Protection Corporation, 503 U. S. 258, 268 (1992), on which the Court principally relies. The Court’s stringent proximate-causation requirement succeeds in precluding recovery in cases alleging a violation of § 1962(c) that, like the present one, have nothing to do with organized crime, the target of the RICO statute. However, the Court’s approach also eliminates recovery for plaintiffs whose injuries are precisely those that Congress aimed to remedy through the authorization of civil RICO suits. Because this frustration of congressional intent is directly contrary to the broad language Congress employed to confer a RICO cause of action, I respectfully dissent from Part II of the Court’s opinion.

I

The language of the civil RICO provision, which broadly permits recovery by “[a]ny person injured in his business or property by reason of a violation” of the Act’s substantive restrictions, § 1964(c) (2000 ed.), plainly covers the lawsuit brought by respondent. Respondent alleges that it was injured in its business, and that this injury was the direct result of petitioners’ violation of § 1962(c).[1] App. 12-17. In 464*464 Holmes, however, we held that a RICO plaintiff is required to show that the RICO violation “not only was a `but for’ cause of his injury, but was the proximate cause as well.” 503 U. S., at 268. We employed the term “`proximate cause’ to label generically the judicial tools used to limit a person’s responsibility for the consequences of that person’s own acts.” Ibid. These tools reflect “`ideas of what justice demands, or of what is administratively possible and convenient.'” Ibid. (quoting W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts § 41, p. 264 (5th ed. 1984) (hereinafter Prosser & Keeton)).

Invoking one of the common-law proximate-cause considerations, we held that a RICO plaintiff must prove “some direct relation between the injury asserted and the injurious conduct alleged.” 503 U. S., at 268. Today the Court applies this formulation to conclude that the “attenuated relationship” between the violation of § 1962(c) and Ideal’s injury “implicates fundamental concerns expressed in Holmes” and that the “absence of proximate causation is equally clear in both cases.” Ante, at 459, 458. But the Court’s determination relies on a theory of “directness” distinct from that adopted by Holmes.

In Holmes, the Court explained that “a plaintiff who complained of harm flowing merely from the misfortunes visited upon a third person by the defendant’s acts was generally said to stand at too remote a distance to recover.” 503 U. S., at 268-269. The plaintiff in Holmes was indirect in precisely this sense. The defendant was alleged to have participated in a stock manipulation scheme that disabled two broker-dealers from meeting their obligations to customers. Accordingly, the plaintiff, Securities Investor Protection Corporation (SIPC), had to advance nearly $13 million to cover the claims of customers of those broker-dealers. SIPC attempted to sue based on the claim that it was subrogated to the rights of those customers of the broker-dealers who did not purchase manipulated securities. We held that 465*465 the nonpurchasing customers’ injury was not proximately caused by the defendant’s conduct, because “the conspirators have allegedly injured these customers only insofar as the stock manipulation first injured the broker-dealers and left them without the wherewithal to pay customers’ claims.” Id., at 271.[2]

Here, in contrast, it was not New York’s injury that caused respondent’s damages; rather, it was petitioners’ own conduct—namely, their underpayment of tax—that permitted them to undercut respondent’s prices and thereby take away its business. Indeed, the Court’s acknowledgment that there is no appreciable risk of duplicative recovery here, in contrast to Holmes, ante, at 459, is effectively a concession that petitioners’ damages are not indirect, as that term is used in Holmes. See 503 U. S., at 269 (“[R]ecognizing claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries”). The mere fact that New York is a direct victim of petitioners’ RICO violation does not preclude Ideal’s claim that it too is a direct victim. Because the petitioners’ tax underpayment directly caused respondent’s injury, Holmes does not bar respondent’s recovery.

The Court nonetheless contends that respondent has failed to demonstrate proximate cause. It does so by relying on our observation in Holmes that the directness requirement is appropriate because “`[t]he less direct an injury is, the more difficult it becomes to ascertain the amount of a 466*466 plaintiff’s damages attributable to the violation, as distinct from other, independent, factors.'” Ante, at 458 (quoting Holmes, supra, at 269, in turn, citing Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U. S. 519 (1983)). In Holmes, we noted that it would be hard for the District Court to determine how much of the broker-dealers’ failure to pay their customers was due to the fraud and how much was due to other factors affecting the broker-dealers’ business success. 503 U. S., at 273-274. The Court contends that here, as in Holmes, it is difficult to “ascertain the damages caused by some remote action.” Ante, at 458.

The Court’s reliance on the difficulty of ascertaining the amount of Ideal’s damages caused by petitioners’ unlawful acts to label those damages indirect is misguided. Holmes and Associated General Contractors simply held that one reason that indirect injuries should not be compensable is that such injuries are difficult to ascertain. Holmes, supra, at 269; Associated Gen. Contractors, supra, at 542. We did not adopt the converse proposition that any injuries that are difficult to ascertain must be classified as indirect for purposes of determining proximate causation.[3]

Proximate cause and certainty of damages, while both related to the plaintiff’s responsibility to prove that the amount of damages he seeks is fairly attributable to the defendant, are distinct requirements for recovery in tort.[4] See 4 Restatement 467*467 (Second) of Torts § 912 (1977) (certainty of damages); 2 id., §§ 430-431 (1963-1964) (proximate causation). That is, to recover, a plaintiff must show both that his injury is sufficiently connected to the tort that “the moral judgment and practical sense of mankind [will] recognize responsibility in the domain of morals,” Sutherland 18, and that the specific pecuniary advantages, the loss of which is alleged as damages, “would have resulted, and, therefore, that the act complained of prevented them,” id., at 106-107. Holmes and Associated General Contractors dealt primarily with the former showing. The Court’s discussion of the union’s “highly speculative” damages in Associated General Contractors focused not on the difficulty of proving the precise amount of damages, but with “the tenuous and speculative character of the relationship between the alleged antitrust violation and the Union’s alleged injury.” 459 U. S., at 545. Here, the relationship between the alleged RICO violation and the alleged injury is clear: Petitioners underpaid sales tax, permitting them to undercharge sales tax, inflicting competitive injury on respondent. The question with which the Court expresses concern—whether Ideal can prove the amount of its actual damages “with sufficient certainty,” Sutherland 106, 107, to permit recovery—is simply not before the Court.

It is nonetheless worth noting that the Court overstates the difficulties of proof faced by respondent in this case. Certainly the plaintiff in this case, as in all tort cases involving damage to business, must demonstrate that he suffered a harm caused by the tort, and not merely by external market conditions. See generally Prosser & Keeton § 130, at 1014-1015, and nn. 92-99 (gathering cases authorizing liability for torts that “depriv[e] the plaintiff of customers or other prospects”); cf. Dura Pharmaceuticals, Inc. v. Broudo, 544 U. S. 468*468 336, 342 (2005) (“[A]n inflated purchase price will not itself constitute or proximately cause the relevant economic loss,” absent evidence that it was the inflated price that actually caused harm). But under the facts as alleged by Ideal, National did not generally lower its prices, so the Court need not inquire into “any number of reasons,” ante, at 458, that it might have done so.[5] Instead, it simply ceased charging tax on cash sales, allegedly, and logically, because it had ceased reporting those sales and accordingly was not itself paying sales tax on them. App. 11-13. Nor is it fatal to Ideal’s proof of damages that National could have continued to charge taxes to its customers and invested the additional money elsewhere. Ante, at 459. Had National actually done so, it might be difficult to ascertain the damages suffered by Ideal as a result of that investment. But the mere fact that National could have committed tax fraud without readily ascertainable injury to Ideal does not mean that its tax fraud necessarily caused no readily ascertainable injury in this case. Likewise, the Court is undoubtedly correct that “Ideal’s lost sales could have resulted from factors other than petitioners’ alleged acts of fraud.” Ibid. However, the means through which the fraudulent scheme was carried out—with sales tax charged on noncash sales, but no tax charged on cash sales—renders the damages more ascertainable than in the typical case of lost business. In any event, it is well within the expertise of a district court to evaluate testimony and evidence and determine what portion of 469*469 Ideal’s lost sales are attributable to National’s lower prices and what portion to other factors.

The Court also relies on an additional reason Holmes gave for limiting recovery to direct victims—namely, that “[t]he requirement of a direct causal connection is especially warranted where the immediate victims of an alleged RICO violation can be expected to vindicate the laws by pursuing their own claims.” Ante, at 460 (citing Holmes, 503 U. S., at 269-270). Certainly, New York can sue here and vindicate the law, rendering respondent’s enforcement of the law less necessary than it would be if respondent were the only direct victim of the illegal activity. But our recognition in Holmes that limiting recovery to direct victims would not undermine deterrence does not support the conclusion that any victim whose lawsuit is unnecessary for deterrence is an indirect victim. Indeed, in any tort case with multiple possible plaintiffs, a single plaintiff’s lawsuit could suffice to vindicate the law. If multiple plaintiffs are direct victims of a tort, it would be unjust to declare some of their lawsuits unnecessary for deterrence, absent any basis for doing so in the relevant statute. Because respondent’s injuries result from petitioners’ fraud, and not from New York’s injuries, respondent has a right to recover equal to that of New York.

Application of common-law principles of proximate causation beyond the directness requirement likewise supports a finding that causation was sufficiently pleaded in this case. Though the Holmes Court noted that directness was “one of [the] central elements” it had considered in evaluating causation, it recognized that proximate causation took “many shapes” at common law. Id., at 268, 269. Cf. Prosser & Keeton § 42, at 273 (noting “two contrasting theories of legal cause,” one extending liability to, but not beyond, “the scope of the `foreseeable risks,'” and the other extending liability to, but not beyond, all “`directly traceable'” consequences 470*470 and those indirect consequences that are foreseeable).[6] The proximate-cause limitation serves to ensure that “a defendant is not answerable for anything beyond the natural, ordinary and reasonable consequences of his conduct.” Sutherland 57. “If one’s fault happens to concur with something extraordinary, and therefore not likely to be foreseen, he will not be answerable for such unexpected result.” Ibid. Based on this principle, courts have historically found proximate causation for injuries from natural causes, if a wrongful act “rendered it probable that such an injury will occur,” id., at 62; for injuries where the plaintiff’s reliance is the immediate cause, such as in an action for fraud, so long as the reliance was “reasonably induced by the prior misconduct of the defendant,” id., at 62, 63; and for injuries where an innocent third party intervenes between the tortfeasor and the victim, such that the innocent third party is the immediate cause of the injury, so long as the tortfeasor “contributed so effectually to [the injury] as to be regarded as the efficient or at least concurrent and responsible cause,” id., at 64, 65 (emphasis deleted).

The Court of Appeals, by limiting RICO plaintiffs to those who are “`the targets, competitors and intended victims of the racketeering enterprise,'” 373 F. 3d 251, 260 (CA2 2004) (quoting Lerner v. Fleet Bank, N. A., 318 F. 3d 113, 124 (CA2 2003)), outlined a proximate-causation standard that falls well in line both with the reasoning behind having a proximate-cause requirement at all, and with the traditional applications of this standard to tortfeasors who caused injury only through a two-step process. The Court, in contrast, permits a defendant to evade liability for harms that are not only foreseeable, but the intended consequences of the defendant’s unlawful behavior. A defendant may do so simply by concocting a scheme under which a further, lawful and 471*471 intentional step by the defendant is required to inflict the injury. Such a rule precludes recovery for injuries for which the defendant is plainly morally responsible and which are suffered by easily identifiable plaintiffs. There is no basis in the RICO statute, in common-law tort, or in Holmes for reaching this result.

II

Because neither the plain language of the civil RICO provision nor our precedent supports the Court’s holding, it must be rejected. It is worth noting, however, that while the Court’s holding in the present case may prevent litigation in an area far removed from the concerns about organized crime that led to RICO’s enactment, that holding also precludes civil recovery for losses sustained by business competitors as a result of quintessential organized criminal activity, cases Congress indisputably intended its broad language to reach.

Congress plainly enacted RICO to address the problem of organized crime, and not to remedy general state-law criminal violations. See H. J. Inc. v. Northwestern Bell Telephone Co., 492 U. S. 229, 245 (1989). There is some evidence, to be sure, that the drafters knew that RICO would have the potential to sweep more broadly than organized crime and did not find that problematic. Id., at 246-248. Nevertheless, the Court has recognized that “in its private civil version, RICO is evolving into something quite different from the original conception of its enactors.” Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479, 500 (1985).

Judicial sentiment that civil RICO’s evolution is undesirable is widespread.[7] Numerous Justices have expressed dissatisfaction with either the breadth of RICO’s application, id., at 501 (Marshall, J., joined by Brennan, Blackmun, and Powell, JJ., dissenting) (“The Court’s interpretation of the civil RICO statute quite simply revolutionizes private litigation; it validates the federalization of broad areas of state common law of frauds, and it approves the displacement of well-established federal remedial provisions. . . . [T]here is no indication that Congress even considered, much less approved, the scheme that the Court today defines”), or its general vagueness at outlining the conduct it is intended to prohibit, H. J. Inc., supra, at 255-256 (Scalia, J., joined by Rehnquist, C. J., and O’Connor and Kennedy, JJ., concurring in judgment) (“No constitutional challenge to this law has been raised in the present case . . . . That the highest Court in the land has been unable to derive from this statute anything more than today’s meager guidance bodes ill for the day when that challenge is presented”). Indeed, proposals for curtailing civil RICO have been introduced in Congress; for example, the Private Securities Litigation Reform Act, enacted in 1995, removed securities fraud as a predicate act under RICO. Pub. L. 104-67, § 107, 109 Stat. 758, amending 18 U. S. C. § 1964(c); see also Abrams, Crime Legislation and the Public Interest: Lessons from Civil RICO, 50 SMU L. Rev. 33, 34 (1996).

This case, like the majority of civil RICO cases, has no apparent connection to organized crime. See Sedima, 473 U. S., at 499, n. 16 (quoting an ABA Task Force determination that, over the period reviewed, only 9% of civil RICO cases at the trial court level involved “`allegations of criminal activity of a type generally associated with professional criminals'”). Given the distance the facts of this case lie 473*473 from the prototypical organized criminal activity that led to RICO’s enactment, it is tempting to find in the Act a limitation that will keep at least this and similar cases out of court.

The Court’s attempt to exclude this case from the reach of civil RICO, however, succeeds in eliminating not only cases that lie far outside the harm RICO was intended to correct, but also those that were at the core of Congress’ concern in enacting the statute. The Court unanimously recognized in Sedima that one reason—and, for the dissent, the principal reason—Congress enacted RICO was to protect businesses against competitive injury from organized crime. See id., at 500-523 (Marshall, J., dissenting) (concluding that the provision conferring a right of action on individual plaintiffs had as its “principal target . . . the economic power of racketeers, and its toll on legitimate businessmen”); id., at 494-500.

The unanimous view of the Sedima Court is correct. The sponsor of a Senate precursor to RICO noted that “`the evil to be curbed is the unfair competitive advantage inherent in the large amount of illicit income available to organized crime.'” Id., at 514 (Marshall, J., dissenting) (quoting 113 Cong. Rec. 17999 (1967) (remarks of Sen. Hruska); some emphasis deleted); see also 473 U. S., at 515 (Marshall, J., dissenting) (“`When organized crime moves into a business, it brings all the techniques of violence and intimidation which it used in its illegal businesses. Competitors are eliminated and customers confined to sponsored suppliers'”). Upon adding a provision for a civil remedy in a subsequently proposed bill, Senator Hruska noted:

“`[This] bill also creates civil remedies for the honest businessman who has been damaged by unfair competition from the racketeer businessman. Despite the willingness of the courts to apply the Sherman Anti-Trust Act to organized crime activities, as a practical matter the legitimate businessman does not have adequate civil remedies available under that act. This bill fills that 474*474 gap.'” Id., at 516 (Marshall, J., dissenting) (quoting 115 Cong. Rec. 6993 (1969); emphasis deleted).

A portion of these bills was ultimately included in RICO, which was attached as Title IX to the Organized Crime Control Act. The Committee Report noted that the Title “has as its purpose the elimination of the infiltration of organized crime and racketeering into legitimate organizations operating in interstate commerce.” S. Rep. No. 91-617, p. 76 (1969).

The observations of the President’s Commission on Law Enforcement and Administration of Justice, the source of much of the congressional concern over organized crime, are consistent with these statements. Its chapter on organized crime noted that “organized crime is also extensively and deeply involved in legitimate business . . . . [I]t employs illegitimate methods—monopolization, terrorism, extortion, tax evasion—to drive out or control lawful ownership and leadership and to exact illegal profits from the public.” The Challenge of Crime in a Free Society 187 (1967). The report noted that “[t]he millions of dollars [organized crime] can throw into the legitimate economic system gives it power to manipulate the price of shares on the stock market, to raise or lower the price of retail merchandise, to determine whether entire industries are union or nonunion, to make it easier or harder for businessmen to continue in business.” Ibid.

It is not difficult to imagine a competitive injury to a business that would result from the kind of organized crime that Sedima, Congress, and the Commission all recognized as the principal concern of RICO, yet that would fail the Court’s restrictive proximate-cause test. For example, an organized crime group, running a legitimate business, could, through threats of violence, persuade its supplier to sell goods to it at cost, so that it could resell those goods at a lower price to drive its competitor out of the business. Honest businessmen would be unable to compete, as they do not engage in 475*475 threats of violence to lower their costs. Civil RICO, if it was intended to do anything at all, was intended to give those businessmen a cause of action. Cf. Sedima, 473 U. S., at 521-522 (Marshall, J., dissenting). Yet just like respondent, those businessmen would not themselves be the immediate target of the threats; the target would be the supplier. Like respondent’s injury, their injury would be most immediately caused by the lawful activity of price competition, not the unlawful activity of threatening the supplier. Accordingly, under the Court’s view, the honest businessman competitor would be just an “indirect” victim, whose injury was not proximately caused by the RICO violation.[8] Civil RICO would thus confer no right to sue on the individual who did not himself suffer the threats of violence, even if the threats caused him harm.

As a result, after today, civil RICO plaintiffs that suffer precisely the kind of injury that motivated the adoption of the civil RICO provision will be unable to obtain relief. If this result was compelled by the text of the statute, the interference with congressional intent would be unavoidable. Given that the language is not even fairly susceptible of such a reading, however, I cannot agree with this frustration of congressional intent.

III

Because I conclude that Ideal has sufficiently pleaded proximate cause, I must proceed to the question which the Court does not reach: whether reliance is a required element of a RICO claim predicated on mail or wire fraud and, if it is, whether that reliance must be by the plaintiff. The Court of Appeals held that reliance is required, but that “a RICO claim based on mail fraud may be proven where the misrepresentations were relied on by a third person, rather than 476*476 by the plaintiff.” 373 F. 3d, at 262, 263. I disagree with the conclusion that reliance is required at all. In my view, the mere fact that the predicate acts underlying a particular RICO violation happen to be fraud offenses does not mean that reliance, an element of common-law fraud, is also incorporated as an element of a civil RICO claim.

Petitioners are correct that the common law generally required a showing of justifiable reliance before a plaintiff could recover for damages caused by fraud. See Neder v. United States, 527 U. S. 1, 24-25 (1999); Prosser & Keeton § 105, at 728. But RICO does not confer on private plaintiffs a right to sue defendants who engage in any act of commonlaw fraud; instead, racketeering activity includes, as relevant to this case, “any act which is indictable under [18 U. S. C. §] 1341 (relating to mail fraud) [and §] 1343 (relating to wire fraud).” § 1961(1) (2000 ed., Supp. III). And we have recognized that these criminal fraud statutes “did not incorporate all the elements of common-law fraud.” Neder, 527 U. S., at 24. Instead, the criminal mail fraud statute applies to anyone who, “having devised or intending to devise any scheme or artifice to defraud . . . for the purpose of executing such scheme or artifice or attempting so to do, places in any post office . . . any matter or thing whatever to be sent or delivered by the Postal Service . . . .” § 1341. See § 1343 (similar language for wire fraud). We have specifically noted that “[b]y prohibiting the `scheme to defraud,’ rather than the completed fraud, the elements of reliance . . . would clearly be inconsistent with the statutes Congress enacted.” Id., at 25.

Because an individual can commit an indictable act of mail or wire fraud even if no one relies on his fraud, he can engage in a pattern of racketeering activity, in violation of § 1962, without proof of reliance. Accordingly, it cannot be disputed that the Government could prosecute a person for such behavior. The terms of § 1964(c) (2000 ed.), which broadly authorize suit by “[a]ny person injured in his business or property by reason of a violation of section 1962,” permit no different conclusion when an individual brings a civil action against such a RICO violator.

It is true that our decision in Holmes to apply the common-law proximate-cause requirement was likewise not compelled by the broad language of the statute. But our decision in that case was justified by the “very unlikelihood that Congress meant to allow all factually injured plaintiffs to recover.” 503 U. S., at 266. This unlikelihood stems, in part, from the nature of proximate cause, which is “not only a general condition of civil liability at common law but is almost essential to shape and delimit a rational remedy.” Systems Management, Inc. v. Loiselle, 303 F. 3d 100, 104 (CA1 2002). We also decided Holmes in light of Congress’ decision to use the same words to impose civil liability under RICO as it had in § 7 of the Sherman Act, 26 Stat. 210, into which federal courts had implied a proximate-cause limitation. 503 U. S., at 268. Accordingly, it was fair to interpret the broad language “by reason of” as meaning, in all civil RICO cases, that the violation must be both the cause-in-fact and the proximate cause of the plaintiff’s injury.

Here, by contrast, the civil action provision cannot be read to always require that the plaintiff have relied on the defendant’s action. Reliance is not a general limitation on civil recovery in tort; it “is a specialized condition that happens to have grown up with common law fraud.” Loiselle, supra, at 104. For most of the predicate acts underlying RICO violations, it cannot be argued that the common law, if it even recognized such acts as civilly actionable, required proof of reliance. See § 1961 (2000 ed., Supp. III). In other words, there is no language in § 1964(c) (2000 ed.) that could fairly be read to add a reliance requirement in fraud cases only. Nor is there any reason to believe that Congress would have defined “racketeering activity” to include acts indictable under the mail and wire fraud statutes, if it intended fraud-related acts to be predicate acts under RICO only 478*478 when those acts would have been actionable under the common law.

Because reliance cannot be read into §§ 1341 and 1343, nor into RICO itself, it is not an element of a civil RICO claim. This is not to say that, in the general case, a plaintiff will not have to prove that someone relied on the predicate act of fraud as part of his case. If, for example, New York had not believed petitioners’ misrepresentation with respect to their sales, Ideal may well not have been injured by petitioners’ scheme, which would have faltered at the first step. Indeed, petitioners recognize that “in the ordinary misrepresentation case, the reliance requirement simply functions as a necessary prerequisite to establishing the causation required by the language of § 1964(c).” Brief for Petitioners 29. But the fact that proof of reliance is often used to prove an element of the plaintiff’s cause of action, such as the element of causation, does not transform reliance itself into an element of the cause of action. See Loiselle, supra, at 104 (“Reliance is doubtless the most obvious way in which fraud can cause harm, but it is not the only way”). Because respondent need not allege reliance at all, its complaint, which alleges that New York relied on petitioners’ misrepresentations, App. 16, is more than sufficient.

* * *

The Congress that enacted RICO may never have intended to reach cases like the one before us, and may have “federalize[d] a great deal of state common law” without any intention of “produc[ing] these far-reaching results.” Sedima, 473 U. S., at 506 (Marshall, J., dissenting). But this Court has always refused to ignore the language of the statute to limit it to “the archetypal, intimidating mobster,” and has instead recognized that “[i]t is not for the judiciary to eliminate the private action in situations where Congress has provided it simply because plaintiffs are not taking advantage of it in its more difficult applications.” Id., at 499-500. 479*479 Today, however, the Court not only eliminates private RICO actions in some situations Congress may have inadvertently regulated, but it substantially limits the ability of civil RICO to reach even those cases that motivated Congress’ enactment of this provision in the first place. I respectfully dissent.

JUSTICE BREYER, concurring in part and dissenting in part.

In my view, the civil damages remedy in the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U. S. C. §§ 1961-1968 (2000 ed. and Supp. III), does not cover claims of injury by one competitor where the legitimate procompetitive activity of another competitor immediately causes that injury. I believe that this is such a case and would consequently hold that RICO does not authorize the private action here at issue.

I

A

RICO essentially seeks to prevent organized criminals from taking over or operating legitimate businesses. Its language, however, extends its scope well beyond those central purposes. RICO begins by listing certain predicate acts, called “`racketeering activity,'” which consist of other crimes, ranging from criminal copyright activities, the facilitation of gambling, and mail fraud to arson, kidnaping, and murder. § 1961(1) (2000 ed., Supp. III). It then defines a “`pattern of racketeering activity'” to include engaging in “at least two” predicate acts in a 10-year period. § 1961(5) (2000 ed.). And it forbids certain business-related activities involving such a “pattern” and an “enterprise.” The forbidden activities include using funds derived from a “pattern of racketeering activity” in acquiring, establishing, or operating any enterprise, and conducting the affairs of any enterprise through such “a pattern.” §§ 1962(a), (c).

480*480 RICO, a federal criminal statute, foresees criminal law enforcement by the Federal Government. § 1963 (2000 ed., Supp. III). It also sets forth civil remedies. § 1964 (2000 ed.). District courts “have jurisdiction to prevent and restrain [RICO] violations.” § 1964(a). And a person “injured in his business or property by reason of a [RICO] violation” may seek treble damages and attorney’s fees. § 1964(c).

B

The present case is a private RICO treble-damages action. A steel supply company, Ideal Steel, has sued a competing steel supply company, National Steel, and its owners, Joseph and Vincent Anza (to whom I shall refer collectively as “National”). Ideal says that National committed mail fraud by regularly filing false New York state sales tax returns in order to avoid paying sales tax that it owed—activity that amounts to a “pattern of racketeering activity.” This activity enabled National to charge lower prices without reducing its profit margins. Ideal says National used some of these excess profits to fund the building of a new store. Both the lower prices and the new outlet attracted Ideal customers, thereby injuring Ideal. Hence, says Ideal, it was injured “in [its] business . . . by reason of” violations of two RICO provisions, the provision that forbids conducting an “enterprise’s affairs” through a “pattern of racketeering activity” and the provision that forbids investing funds derived from such a “pattern” in an “enterprise.” §§ 1962(c), (a), 1964(c). The question before us is whether RICO permits Ideal to bring this private treble-damages claim.

II

This Court, in Holmes v. Securities Investor Protection Corporation, 503 U. S. 258, 268 (1992), held that RICO’s private treble-damages provision “demand[ed] . . . some direct relation between the injury asserted and the injurious conduct alleged.” The Court then determined that the injury 481*481 alleged by the plaintiff in that case was too remote from the injurious conduct to satisfy this requirement.

I do not agree with the majority insofar as it believes that Holmes’ holding in respect to the fact pattern there at issue virtually dictates the answer to the question here. In my view, the “causal connection” between the forbidden conduct and plaintiff’s harm is, in certain key ways, more direct here than it was in Holmes. In Holmes, the RICO plaintiff was a surrogate for creditors of broker-dealers that went bankrupt after losing money in stocks that had been overvalued due to fraudulent statements made by the RICO defendant and others. Put in terms of “proximate cause,” the plaintiff’s harm (an ordinary creditor loss) differed in kind from the harm that the “predicate acts” (securities fraud) would ordinarily cause (stock-related monetary losses). The harm was “indirect” in the sense that it was entirely derivative of the more direct harm the defendant’s actions had caused the broker-dealers; and, there were several steps between the violation and the harm (misrepresentation—broker-dealer losses—broker-dealer business failure—ordinary creditor loss). Here, however, the plaintiff alleges a harm (lost customers) that flows directly from the lower prices and the opening of a new outlet—actions that were themselves allegedly caused by activity that Congress designed RICO to forbid (conducting a business through a “pattern” of “predicate acts” and investing in business funds derived from such a “pattern”). In this sense, the causal links before us are more “direct” than those in Holmes. See ante, at 464-465 (Thomas, J., concurring in part and dissenting in part).

Nonetheless, I agree with the majority that Holmes points the way. That case makes clear that RICO contains important limitations on the scope of private rights of action. It specifies that RICO does not provide a private right of action “simply on showing that the defendant violated § 1962, the plaintiff was injured, and the defendant’s violation was a `but for’ cause of [the] plaintiff’s injury.” 503 U. S., at 265-266 482*482 (footnote omitted). Pointing out “the very unlikelihood that Congress meant to allow all factually injured plaintiffs to recover,” id., at 266 (emphasis added), Holmes concludes that RICO imposes a requirement of “proximate cause,” a phrase that “label[s] generically the judicial tools used to limit a person’s responsibility for the consequences of that person’s own acts,” id., at 268. It recognizes that these tools seek to discern “`what justice demands, or . . . what is administratively possible and convenient.'” Ibid. (quoting W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts § 41, p. 264 (5th ed. 1984)). It also explains that “proximate cause” demands “directness,” while specifying that “directness” is only one of “the many shapes this concept took at common law.” 503 U. S., at 268, 269. And it points to antitrust law, both as a source of RICO’s trebledamages provisions and as an aid to their interpretation. Ibid.

In my view, the “antitrust” nature of the treble-damages provision’s source, taken together with both RICO’s basic objectives and important administrative concerns, implies that a cause is “indirect,” i. e., it is not a “proximate cause,” if the causal chain from forbidden act to the injury caused a competitor proceeds through a legitimate business’ ordinary competitive activity. To use a physical metaphor, ordinary competitive actions undertaken by the defendant competitor cut the direct causal link between the plaintiff competitor’s injuries and the forbidden acts.

The basic objective of antitrust law is to encourage the competitive process. In particular, that law encourages businesses to compete by offering lower prices, better products, better methods of production, and better systems of distribution. See, e. g., 1 P. Areeda & H. Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 100a, pp. 3-4 (2d ed. 2000). As I shall explain, these principles suggest that RICO does not permit private action based solely upon this competitive type of harm, i. e., 483*483 harm a plaintiff suffers only because the defendant was able to attract customers through normal competitive methods, such as lower prices, better products, better methods of production, or better systems of distribution. In such cases, the harm falls outside the limits that RICO’s private trebledamages provision’s “proximate-cause” requirement imposes. In such cases the distance between the harm and the predicate acts that funded (or otherwise enabled) such ordinary competitive activity is too distant. The harm is not “direct.”

At the same time, those principles suggest that other types of competitive injuries not within their protective ambit could lie within, not outside, “proximate-cause” limits. Where, for example, a RICO defendant attracts customers in ways that involve illegitimate competitive means, e. g., by threatening violence, a claim may still lie. Claims involving RICO violations that objectively target a particular competitor, e. g., bribing an official to harass a competitor, could also be actionable.

Several considerations lead to this conclusion. First, I have found no case (outside the Second Circuit, from which this case arose) in which a court has authorized a private treble-damages suit based upon no more than a legitimate business’ ordinary procompetitive activity (even where financed by the proceeds of a RICO predicate act).

Second, an effort to bring harm caused by ordinary competitive activity within the scope of RICO’s private trebledamages action provision will raise serious problems of administrability. Ante, at 458-460 (majority opinion); see also Holmes, supra, at 269. To demonstrate that a defendant’s lower price caused a plaintiff to lose customers (or profits) requires the plaintiff to show what would have happened in its absence. Would customers have changed suppliers irrespective of the price change because of other differences in the suppliers? Would other competing firms have lowered their prices? Would higher prices have attracted 484*484 new entry? Would demand for the industry’s product, or the geographic scope of the relevant market, have changed? If so, how? To answer such questions based upon actual market circumstances and to apportion damages among the various competitors harmed is difficult even for plaintiffs trying to trace harm caused by a defendants’ anti-competitive behavior. Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U. S. 519, 542, 544 (1983) (the possibility that harm “may have been produced by independent factors” and “the danger of complex apportionment of damages” weigh against finding the requisite causal connection in an antitrust case). To answer such questions in the context of better functioning markets, where prices typically reflect competitive conditions, would likely prove yet more difficult.

Third, where other victims, say, victims of the underlying RICO “predicate acts” are present, there is no pressing need to provide such an action. Those alternative victims (here the State of New York) typically “could be counted on to bring suit for the law’s vindication.” Holmes, supra, at 273. They could thus fulfill Congress’ aim in adopting the civil remedy of “turn[ing victims] into prosecutors, `private attorneys general,’ dedicated to eliminating racketeering activity.” Rotella v. Wood, 528 U. S. 549, 557 (2000) (citing Klehr v. A. O. Smith Corp., 521 U. S. 179, 187 (1997)).

Fourth, this approach to proximate cause would retain private actions aimed at the heart of Congress’ relevant RICO concerns. RICO’s sponsors, in reporting their underlying reasons for supporting RICO, emphasized, not the fair, ordinary competition that an infiltrated business might offer its competitors, but the risk that such a business would act corruptly, exercising unfair methods of competition. S. Rep. No. 91-617, pp. 76-78 (1969); see also Cedric Kushner Promotions, Ltd. v. King, 533 U. S. 158, 165 (2001). RICO focuses upon the “infiltration of legitimate business by organized crime,” in significant part because, when “`organized crime moves into a business, it brings all the techniques of 485*485 violence and intimidation which it used in its illegal businesses.'” Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479, 517, 515 (1985) (Marshall, J., dissenting) (quoting 113 Cong. Rec. 17999 (1967)).

My approach would not rule out private actions in such cases. Nor would it rule out three of the four suits mentioned by Justice Marshall, dissenting in Sedima, when he describes RICO’s objectives. It would not rule out lawsuits by injured competitors or legitimate investors if a racketeer, “uses `[t]hreats, arson and assault . . . to force competitors out of business'”; “uses arson and threats to induce honest businessmen to pay protection money, or to purchase certain goods, or to hire certain workers”; or “displace[s]” an “honest investor” when he “infiltrates and obtains control of a legitimate business . . . through fraud” or the like. 473 U. S., at 521, 522.

I concede that the approach would rule out a competitor’s lawsuit based on no more than an “infiltrated enterprise” operating a legitimate business to a businessman’s competitive disadvantage because unlawful predicate acts helped that legitimate business build a “strong economic base.” And I recognize that this latter kind of suit at least arguably would have provided helpful deterrence had the view of Sedima’s dissenting Justices prevailed. Id., at 500-523 (Marshall, J., dissenting) (arguing that RICO’s private action provision did not authorize suits based on harm flowing directly from predicate acts); id., at 523-530 (Powell, J., dissenting) (same). But the dissent did not prevail, and the need for deterrence consequently offers only weakened support for a reading of RICO that authorizes private suits in this category.

Fifth, without this limitation, RICO enforcement and basic antitrust policy could well collide. Firms losing the competitive battle might find bases for a RICO attack on their more successful competitors in claimed misrepresentations or even comparatively minor misdeeds by that competitor. Firms 486*486 that fear such treble-damages suits might hesitate to compete vigorously, particularly in concentrated industries where harm to a competitor is more easily traced but where the consumer’s need for vigorous competition is particularly strong. The ultimate victim of any such tendency to pull ordinary competitive punches of course would be not the competing business, but the consumer. Although Congress did not intend its RICO treble-damages provision as a simple copy of the antitrust laws’ similar remedies, see, e. g., Sedima, supra, at 498-499, there is no sound reason to interpret RICO’s treble-damages provision as if Congress intended to set it and its antitrust counterpart at cross-purposes.

For these reasons, I would read into the private trebledamages provision a “proximate-cause” limitation that places outside the provision harms that are traceable to an unlawful act only through a form of legitimate competitive activity.

III

Applying this approach to the present case, I would hold that neither of Ideal’s counts states a RICO private trebledamages claim. National is a legitimate business. Another private plaintiff (the State of New York) is available. The question is whether Ideal asserts a harm caused directly by something other than ordinary competitive activity, i. e., lower prices, a better product, a better distribution system, or a better production method.

Ideal’s second count claims injury caused by National’s (1) having taken customers (2) attracted by its new store (3) that it financed in part through profits generated by the tax fraud scheme, and the financing is the relevant violation. § 1962(a). The opening of a distribution outlet is a legitimate competitive activity. It benefits the firm that opens it by making it more convenient for customers to purchase from that supplier. That ordinary competitive process is all the complaint describes. And for the reasons I have given 487*487 in Part II, supra, I believe that the financing of a new store—even with funds generated by unlawful activities—is not sufficient to create a private cause of action as long as the activity funded amounts to legitimate competitive activity. Ideal must look for other remedies, e. g., bringing the facts to the attention of the United States Attorney or the State of New York.

Ideal’s first count presents a more difficult question. It alleges that National filed false sales tax returns to the State of New York. As an action indictable under the federal mail fraud statute, that action is a predicate act under RICO. See § 1961(1) (2000 ed., Supp. III). National passed these savings on to its cash customers by not charging them sales tax, thereby attracting more cash customers than it would have without the scheme. Is this a form of injury caused, not by ordinary competitive activity, but simply by the predicate act itself?

In my view, the answer to this question is “no.” The complaint alleges predicate acts that amount simply to the facts that National did not “charge” or “pay” sales taxes or accurately “report” sales figures to the State. National did not tell its customers, “We shall not pay sales taxes.” Rather, it simply charged the customer a lower price, say, $100 rather than $100 plus $8 tax. Consider a retailer who advertises to the customer a $100 table and adds, “We pay all sales taxes.” Such a retailer is telling the customer that he will charge the customer a lower price by the amount of the tax, i. e., about $92. The retailer implies that he, the retailer, will pay the tax to the State, taking the requisite amount owed to the State from the $100 the customer paid for the item.

The defendants here have done no more. They have in effect cut the price of the item by the amount of the sales tax and then kept the money instead of passing it on to the State. They funded the price cut from the savings, but the 488*488 source of the savings is, in my view, beside the point as long as the price cut itself is legitimate. I can find nothing in the complaint that suggests it is not.

For these reasons, I would reverse the decision of the Court of Appeals on both counts.

[*] Gene C. Schaerr, Linda T. Coberly, Charles B. Klein, Robin S. Conrad, and Amar D. Sarwal filed a brief for the Chamber of Commerce of the United States of America as amicus curiae urging reversal.

Henry H. Rossbacher and G. Robert Blakey filed a brief for the National Association of Shareholder and Consumer Attorneys as amicus curiae urging affirmance.

[1] Respondent also alleges that petitioners injured its business through a violation of § 1962(a), although the parties dedicate little attention to this issue. In light of the Court’s disposition of the § 1962(c) claim and the limited discussion of § 1962(a) by the parties, I agree with the Court that we should give the Court of Appeals the first opportunity to reconsider the § 1962(a) claim. Accordingly, I join Part III of the Court’s opinion.

[2] Sutherland’s treatise on damages, on which the Court relied in Holmes, labels the same type of claims indirect: those where one party is injured, and it is that very injury—and not the wrongful behavior by the tortfeasor—that causes the injury to the plaintiff. See 1 J. Sutherland, Law of Damages 55 (1882) (hereinafter Sutherland). Indeed, every example cited in Sutherland in illustration of this principle parallels Holmes; the plaintiff would not be injured absent the injury to another victim. See Sutherland 55-56.

[3] Indeed, in Associated General Contractors, we did not even squarely hold that the reason that indirect damages are not compensable was that the damages were not easily ascertainable; instead, we merely recognized the empirical fact that “[p]artly because it is indirect, and partly because the alleged effects on the Union may have been produced by independent factors, the Union’s damages claim is also highly speculative.” 459 U. S., at 542.

[4] Sutherland described the interrelation between the two concepts: “A fatal uncertainty may infect a case where an injury is easily provable, but the alleged responsible cause cannot be sufficiently established as to the whole or some part of that injury. So it may exist where a known and provable wrong or violation of contract appears, but the alleged loss or injury as a result of it cannot be certainly shown.” Sutherland 94.

[5] Nor is it fair to require a plaintiff to prove that the tort caused the lowering of prices at the motion to dismiss stage. Ideal’s complaint alleges that petitioners “pass on to National’s customers the sales tax `savings’ that National realizes as a result of its false returns.” App. 16. This allegation that, as a factual matter, National was able to charge a lower price after tax because of its fraud suffices to permit Ideal to survive a motion to dismiss on the question whether the prices were lowered due to the fraud, as opposed to other factors.

[6] Prosser and Keeton appear to use “direct” in a broader sense than that adopted by the Court in Holmes. See Prosser & Keeton § 43, at 273, 293-297.

[7] See Rehnquist, Remarks of the Chief Justice, 21 St. Mary’s L. J. 5, 13 (1989) (“I think that the time has arrived for Congress to enact amendments to civil RICO to limit its scope to the sort of wrongs that are connected to organized crime, or have some other reason for being in federal court”); Sentelle, Civil RICO: The Judges’ Perspective, and Some Notes on Practice for North Carolina Lawyers, 12 Campbell L. Rev. 145, 148 (1990) (“[E]very single district judge with whom I have discussed the subject (and I’m talking in the dozens of district judges from across the country) echoes the entreaty expressed in the Chief Justice’s title in The Wall Street Journal[, Get RICO Cases Out of My Courtroom, May 19, 1989, p. A14, col. 4]”).

[8] The honest businessman would likewise fail Justice Scalia’s theory of proximate causation, because laws against threats of violence are intended to protect those who are so threatened, not other parties

Summary Judgment to plaintiff on RICO claim

Typically defendants seek to dismiss claims filed under RICO. What if, a plaintiff argued the claim was indefensible and the defenses unsustainable, and sought summary judgment. Here, the Sixth Circuit, with one dissent, sustained a RICO summary judgment. The court explained, “considering this evidence, no reasonable juror could accept Defendants’ argument that the Plummers deceived them and concealed the fact that the Mare Lease Program was drastically oversold.” In language far more often seen for the defendant, The Sixth Circuit said,

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, (1986) (emphasis in original). “`[T]here must be evidence on which the jury could reasonably find for the’ non-moving party.” White v. Baxter Healthcare Corp., 533 F.3d 381, 390 (6th Cir.2008) (quoting Anderson, 477 U.S. at 252, 106 S.Ct. 2505). In other words, “where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
________________________________

In Re ClassicStar 727 F.3d 473 (6th Cir. 2013) Opinion

In re CLASSICSTAR MARE LEASE LITIGATION.
West Hills Farms, LLC, Arbor Farms, LLC, Nelson Breeders, LLC, MacDonald Stables, LLC, Jaswinder Grover, Monica Grover, Plaintiffs-Appellees,
v.
ClassicStar Farms, Inc., GeoStar Corporation, Tony P. Ferguson, ClassicStar 2004, LLC, Thomas E. Robinson (12-5467); John W. Parrott (12-5475), Defendants-Appellants.

Nos. 12-5467, 12-5475.

United States Court of Appeals, Sixth Circuit.

Argued: March 14, 2013.

Decided and Filed: July 18, 2013.

Rehearing and Rehearing En Banc Denied September 18, 2013.

478*478 ARGUED: Kannon K. Shanmugam, Williams & Connolly LLP, Washington, D.C., for Appellants. Barry D. Hunter, Frost Brown Todd, Lexington, Kentucky, for Appellees in 12-5467 and 12-5475 ON BRIEF: Kannon K. Shanmugam, Williams & Connolly LLP, Washington, D.C., for Appellants. Barry D. Hunter, Frost Brown Todd, Lexington, Kentucky, for Appellees in 12-5467 and 12-5475.

Before: MERRITT, CLAY, and GRIFFIN, Circuit Judges.

CLAY, J., delivered the opinion of the court, in which GRIFFIN, J., joined. MERRITT, J. (pp. 497-501), delivered a separate opinion concurring in part and dissenting in part.

OPINION

CLAY, Circuit Judge.

This case arises from the fraudulent operation of an investment vehicle called the Mare Lease Program. Plaintiffs, a group of investors, alleged that Defendants violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c), by convincing them to invest in the Mare Lease Program and related entities in order to take advantage of various tax deductions. Little did Plaintiffs know that the assets which formed the basis of the touted tax deductions were dramatically undervalued and, in some cases, wholly fictitious. After extensive discovery, Plaintiffs moved for summary judgment on their RICO claim as well as parallel state-law fraud and breach of contract claims. The district court granted summary judgment to Plaintiffs on each claim and awarded damages of approximately $49.4 million and prejudgment interest in excess of $15.6 million. Because we agree that the record reflects no genuine dispute over any material facts, we AFFIRM the district court’s grant of summary judgment.

BACKGROUND

A. The Mare Lease Program

In 1990, David Plummer created the Mare Lease Program to enable investors to participate in his horse-breeding business while taking advantage of the sizable tax benefits associated with raising horses. Plummer, who operated the Mare Lease Program through a company named New Classic Breeders, LLC, was a nationally recognized expert in horse-breeding and the tax consequences of related investments. Plummer encouraged investors to take advantage of a provision in the tax code which classified horse-breeding investments as farming expenses, entitling investors to a five-year net operating loss carryback period instead of the typical two years. See 26 U.S.C. § 172(b)(1)(G).

An investor in the Program would lease a breeding mare from New Classic Breeders for a single season; the mare would be paired with a suitable stallion, and the 479*479 investor could keep any resulting foals, which could then be either kept or sold. Investors could deduct the amount of their initial investment — which, unsurprisingly, tended to be based on the amount they wished to deduct for the previous five years — and also realize the gain from owning a valuable Thoroughbred foal. Investors were encouraged to hold their foals for at least two years before selling them, qualifying the sale for the much lower long-term capital gains tax rate. See 26 U.S.C. § 1231(b)(3)(A).

Between 2001 and 2005, the Mare Lease Program generated more than $600 million in revenue. The Program was aggressively marketed to wealthy individuals, who were assured that it was a reliable way to generate tax deductions and convert ordinary income into long-term capital gains. Accordingly, the economic success of the Program hinged on the investors’ eligibility to receive the advertised tax benefits. To reassure investors that the Program’s tax advantages were legitimate, they were given tax advice by two law firms hired by Defendants: Handler, Thayer, and Duggan, LLC, and Hanna Strader P.C. These firms and an accounting firm purported to have vetted the Mare Lease Program, and they opined that the investments would be fully tax deductible as promised.

B. The Scheme

GeoStar Corporation is a privately held company specializing in oil and gas exploration. By around 2000, GeoStar and its publicly traded affiliate, Gastar Exploration, Ltd., had acquired a number of undeveloped oil and gas properties, and they were looking for ways to raise capital to exploit these properties. GeoStar executives were introduced to David Plummer and the Mare Lease Program around that time, and in 2001, GeoStar acquired New Classic Breeders through a holding company it created named ClassicStar Farms, Inc., and it renamed the business ClassicStar, LLC (“ClassicStar”). David Plummer served as the president of ClassicStar Farms, Inc. until 2003, when he became GeoStar’s director of marketing. After David Plummer moved to GeoStar, his son Spencer Plummer became president of ClassicStar Farms. Together with GeoStar executives, including Defendants, they operated the Mare Lease Program.

In an effort to finance its undeveloped oil and gas properties, GeoStar encouraged Mare Lease Program investors to exchange their interests in the Program for interests in coalbed methane wells owned by GeoStar subsidiaries, as well as Gastar stock. GeoStar and ClassicStar told investors that they could take advantage of the five-year operating loss carryback period associated with their horse-breeding investments, and then quickly convert those investments into oil and gas interests that, unlike the foals, would not need to be held for two years before being sold. Investors were told that these transfers would be tax-free because they could deduct any gain from the conversion as intangible drilling costs associated with the development of the wells. See 26 U.S.C. § 263(c). In this way, GeoStar was able to channel investors’ money through the Mare Lease Program into its oil and gas developments.

To further entice investors into the Mare Lease Program, ClassicStar arranged for a large part (usually half) of the initial investment to be financed through the National Equine Lending Company (“NELC”), which was represented to be “a national lender on approved credit.” (R. 1701, Ex. 9, at 7.) Investors would deduct the entirety of their investment, including the loan, from their taxable income from 480*480 the past five years.[1] Although it was consistently described as a third-party lender, NELC was in fact owned and operated by Gary Thomson, David Plummer’s brother-in-law. Spencer Plummer told one of Plaintiffs’ financial advisers that “we can control him [Thomson] and what he does,” (R. 1701, Ex. 7, at 8,) but none of the investors was ever told that NELC had no funds of its own. ClassicStar provided all of NELC’s funds and arranged sham three-way transactions in which funds were transferred from ClassicStar to NELC, loaned to an investor, and then paid back to ClassicStar as part of an investment in the Mare Lease Program. The purpose of these transactions was to make the Program attractive to investors by allowing them to drastically increase their investments and, by extension, their tax deductions.

GeoStar and ClassicStar’s efforts in promoting the Mare Lease Program were successful, so successful in fact that investors purchased interests in many more mares than were actually owned by ClassicStar. Although investors were repeatedly told that they were leasing actual horses, ClassicStar never owned anywhere near the number of horses purportedly being leased. Between 2001 and 2004, ClassicStar owned between $10 million and $56 million worth of mares, but sold an average of $150 million worth of mare lease packages during each of those years. (R. 1701, Ex. 23.) By the end of 2004, the difference between the value of the mares owned by ClassicStar and the value of the mare leases sold to investors was approximately $270 million. (R. 1701, Ex. 5, at 195-97.) To disguise the shortfall, ClassicStar substituted less valuable quarter-horses for Thoroughbreds and, in many cases, simply did not identify the horses that investors believed they were leasing.

To conceal the shortfall of mares and funnel money into their oil and gas interests, GeoStar and ClassicStar encouraged investors to exchange their mare leases for interests in various oil and gas properties. However, by mid-2003, these interests were also oversold. The tax deductions for intangible drilling costs used to entice investors out of the Mare Lease Program, like the mare lease deductions themselves, were dubious because they were based on fictitious assets, work that was never performed, and costs that were never expended.

Faced with a severe shortfall of assets in both the Mare Lease Program and their oil and gas programs, and no longer wishing to offer investors Gastar stock in exchange for their (largely worthless) interests in these other programs, GeoStar and ClassicStar created First Equine Energy Partners, LLC (“FEEP”). FEEP purported to offer investors a vehicle to combine equine interests — those contributed to the program by the investors themselves — with oil and gas interests to be contributed by GeoStar and its subsidiaries. (R. 1701, Ex. 68.) However, FEEP was never properly funded by GeoStar, and it owned either few assets or none at all. As one of Plaintiffs’ experts testified, “FEEP as realized by ClassicStar was merely another means to perpetuate the ruse that began with the Mare Lease Program in which ClassicStar failed to deliver mares to participants.” (R. 1701, Ex. 9, at 65.)

As a result of the dramatic overselling of the Mare Lease Program, resulting in “investments” in horses that largely did not 481*481 exist, coupled with the sham loans from NELC designed to artificially inflate the size of the investments and the illusory nature of FEEP, the IRS has since disallowed the investors’ tax deductions.[2] Among the numerous problems with the Program was that investors had claimed deductions related to improperly inflated expenditures on assets that did not exist. The government also opened a criminal investigation into the scheme to facilitate fraudulent tax deductions. Because of their participation in the Mare Lease Program, David Plummer, Spencer Plummer, an accountant named Terry Green, and one of the Defendants in this case, John Parrott, each pleaded guilty to one count of conspiracy to defraud the United States.

C. The Defendants

GeoStar Corporation has its principal place of business in Mt. Pleasant, Michigan. Together, Thom Robinson, Tony Ferguson, and John Parrott own approximately 75% of GeoStar, as well as a controlling interest in Gastar, GeoStar’s publicly traded affiliate. GeoStar acquired New Classic Breeders — later ClassicStar, LLC — through a holding company named ClassicStar Farms, Inc. ClassicStar and its employees thereafter acted as GeoStar’s agents, with all fundamental financial and operational decisions made by GeoStar. Although Robinson and GeoStar had the final word on most financial matters, particularly with respect to the Mare Lease Program, ClassicStar managed its own employees. ClassicStar Farms, Inc. and ClassicStar 2004 had no operations or employees separate from ClassicStar, but each entered into contracts in its own name.

Thomas Robinson was President and CEO of GeoStar and served as a co-manager of ClassicStar. By all accounts he had the final word on all fundamental decisions regarding ClassicStar’s operations and finances, including its management of the Mare Lease Program. Robinson orchestrated the original acquisition of New Classic Breeders from David Plummer, and he then hired Plummer first as president of Classic Star Farms, Inc., and then as GeoStar’s head of marketing. Robinson also served as President and CEO of First Source Wyoming, a GeoStar affiliate, and Gastar; in those roles he directed the acquisition and development of oil and gas properties around the world. Finally, Robinson helped create FEEP, helped draft its private placement memoranda, and sat on its advisory committee.

Tony Ferguson was a vice president of GeoStar and co-manager of ClassicStar. He also served as Vice President of Operations at First Source Wyoming, as an owner and Executive Vice President of Gastar, and as tax partner and president of the manager of FEEP. Ferguson was actively involved in the marketing and promotion of the Mare Lease Program and the conversion of those interests into oil and gas interests. All questions related to the tax implications of the conversions went to Ferguson. He provided cover stories to investors when they inquired as to why they were not being assigned specific horses, and he was aware that less valuable quarter-horses were being substituted — sometimes only on paper — for Thoroughbreds in investors’ mare lease packages. At one point, David Plummer “lamented the fact that Tony [Ferguson] was taking his money for horses and using it for 482*482 something else, using it for gas.” (R. 1701, Ex. 19, at 24-25.)

John Parrott was a vice president of GeoStar and a vice president of ClassicStar. Parrott reviewed and approved the marketing materials used by ClassicStar to promote the Mare Lease Program, including the attorney opinion letters that purported to confirm the legitimacy of the advertised tax deductions. He also either drafted or revised the language of the mare lease contracts themselves. Together with Robinson, Parrott helped draft the FEEP private placement memoranda and sat on its advisory committee. When Parrott pleaded guilty to conspiracy to defraud the United States, he admitted the following facts:

As Vice President of GeoStar Corp. between approximately 2001 and 2009, I assisted in the preparation of documents and other activities designed, pursuant to conversations and agreements with others, to allow taxpayers to take deductions to which they were not entitled, relating to their investments in the ClassicStar Mare Lease Program and related endeavors.

(R. 1701, Ex. 8, at 46.)

D. The Plaintiffs

Plaintiffs collectively invested approximately $90 million in the Mare Lease Program in 2003 and 2004. Each of them received some sort of presentation from ClassicStar describing the nature of the Program, including its tax advantages, expected return on investment, and unique financing structure. Each signed a mare lease agreement, made the appointed payments together with a loan from NELC, and later received a schedule purporting to list the mares and breeding pairs that ClassicStar had assigned to them. Each received a tax opinion letter from one of the two law firms associated with ClassicStar and GeoStar; Arbor Farms, West Hills Farms, and Nelson Breeders received advice from Hanna Strader, and the Grovers and MacDonald Stables received advice from Handler Thayer.

MacDonald Stables exchanged its interests in the Mare Lease Program for shares of Gastar stock and interests in FEEP. The Grovers converted their mare leases into interests in FEEP and other GeoStar subsidiaries. The remaining Plaintiffs each invested considerable sums in the Mare Lease Program, primarily financed through short- and long-term loans from NELC. Although Plaintiffs received the value of some of the foals they were promised, the return never approached the amount of their investments because of the absence of a sufficient number of horses in the Program. After adding their out-of-pocket losses to the amount of the fraudulently obtained tax deductions that Plaintiffs must repay to the IRS, Plaintiffs’ collective losses totaled $16,468,603.87. (R. 2267-1.)

On July 28, 2006, Plaintiffs filed a complaint in the United States District Court for the Eastern District of Kentucky, alleging twenty-eight counts against twenty-three defendants, including federal RICO claims, violations of federal and state securities laws, common-law fraud, breach of contract, negligent misrepresentation, unjust enrichment, theft, and civil conspiracy. (R. 769.) Dozens of similarly situated plaintiffs filed analogous actions against many of the same defendants in California, Florida, Pennsylvania, and Utah. Pursuant to 28 U.S.C. § 1407, the United States Judicial Panel on Multidistrict Litigation consolidated the cases before a single district court. Because Plaintiffs’ case was filed earliest, it became the lead case in the newly consolidated litigation.

After years of contentious pretrial proceedings and discovery, Plaintiffs moved for summary judgment on their RICO, fraud, and breach of contract claims. In a comprehensive opinion, the district court granted summary judgment to Plaintiffs on each of the three claims. The court accepted Plaintiffs’ damages calculation and determined that their out-of-pocket losses, or “their cash investment less any return,” amounted to $16,468,603.87. (R. 2314, at 95.) Because Plaintiffs were entitled to treble damages under RICO, see 18 U.S.C. § 1964(c), the district court multiplied these losses by three, to arrive at the figure of $49,405,811.61. The court concluded that prejudgment interest was appropriate and used the Kentucky state statutory interest rate of 8% to award prejudgment interest in the amount of $15,636,273.00.

DISCUSSION

We review a grant of summary judgment de novo, construing the evidence and drawing all reasonable inferences in favor of the nonmoving party. Martin v. Cincinnati Gas & Elec. Co., 561 F.3d 439, 443 (6th Cir.2009). Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original). “`[T]here must be evidence on which the jury could reasonably find for the’ non-moving party.” White v. Baxter Healthcare Corp., 533 F.3d 381, 390 (6th Cir.2008) (quoting Anderson, 477 U.S. at 252, 106 S.Ct. 2505). In other words, “[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

I. RICO

Plaintiffs’ primary claim against Defendants is based on the federal RICO statute, 18 U.S.C. §§ 1961-68. Among other activities, the statute prohibits the following conduct:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.

18 U.S.C. § 1962(c). To state a claim under this section, a plaintiff must plead the following elements: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Moon v. Harrison Piping Supply, 465 F.3d 719, 723 (6th Cir.2006) (citing Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)). RICO defines “racketeering activity” to include numerous so-called predicate acts, including “any act which is indictable under any of the following provisions of title 18, United States Code: … section 1341 (relating to mail fraud), section 1343 (relating to wire fraud).” 18 U.S.C. § 1961(1).

To prevent organized crime from “obtaining a foothold in legitimate business,” Congress created a civil cause of action for RICO violations. See Doe v. Roe, 958 F.2d 763, 768 (7th Cir.1992). The statute provides in relevant part that “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor … 484*484 and shall recover threefold the damages he sustains.” 18 U.S.C. § 1964(c). In addition to establishing that a given group of defendants conducted the affairs of a qualifying enterprise through a pattern of racketeering activity, civil RICO plaintiffs must show that the RICO violation was the proximate cause of the injury to their business or property. See Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992).

The district court granted summary judgment to Plaintiffs on their RICO claim, finding that Defendants had conducted the affairs of an enterprise through a pattern of racketeering activity in violation of § 1962(c). Defendants raise three distinct challenges to the district court’s conclusions. They argue 1) that there are disputed issues of material fact relating to Defendants’ intent to defraud; 2) that Plaintiffs did not establish proximate causation; and 3) that Plaintiffs did not establish the existence of a qualifying RICO enterprise. As discussed below, we reject each of these arguments.

A. Intent to Defraud

“To establish a substantive RICO violation, a plaintiff must show `a pattern of racketeering activity.'” Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783, 795 (6th Cir.2012) (citing 18 U.S.C. § 1962(c)). Mail fraud and wire fraud are among the enumerated predicate offenses that can constitute “racketeering activity.” See 18 U.S.C. § 1961(1). The district court found that Defendants committed no fewer than thirty-seven acts that would be indictable as mail and wire fraud. “A scheme to defraud is `any plan or course of action by which someone intends to deprive another … of money or property by means of false or fraudulent pretenses, representations, or promises.'” United States v. Faulkenberry, 614 F.3d 573, 581 (6th Cir.2010) (quoting United States v. Daniel, 329 F.3d 480, 485 (6th Cir.2003)). “A plaintiff must also demonstrate scienter to establish a scheme to defraud, which is satisfied by showing the defendant acted either with a specific intent to defraud or with recklessness with respect to potentially misleading information.” Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 404 (6th Cir.2012).

Defendants argue that summary judgment was inappropriate because there are disputed issues of fact as to whether they intended to defraud Plaintiffs through the Mare Lease Program. Defendants assert that the district court improperly relied only on circumstantial evidence to find the requisite intent and disregarded evidence that they lacked knowledge of the fraudulent scheme. Although Defendants correctly posit that “claims involving proof of a defendant’s intent seldom lend themselves to summary disposition,” Kennedy v. City of Villa Hills, Ky., 635 F.3d 210, 218 (6th Cir.2011), summary judgment is appropriate when the evidence is “so one-sided that no reasonable person could decide the contrary,” GenCorp, Inc. v. Am. Int’l Underwriters, 178 F.3d 804, 819 (6th Cir.1999); see also Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir.1989) (“Cases involving state of mind issues are not necessarily inappropriate for summary judgment.”). To survive summary judgment, the “mere existence of a scintilla of evidence in support” of a party’s position will not suffice. Shropshire v. Laidlaw Transit, Inc., 550 F.3d 570, 576 (6th Cir. 2008) (citing Anderson, 477 U.S. at 252, 106 S.Ct. 2505).

First, Defendants argue that a genuine factual dispute exists over whether they knew that the mare lease interests were oversold. On the contrary, the evidence clearly established that Defendants operated and marketed the Mare Lease Program 485*485 with the knowledge that ClassicStar never owned anywhere near the number of Thoroughbreds it purported to lease to investors. ClassicStar, through David and Spencer Plummer, and GeoStar, through Robinson, Ferguson, and Parrott, consistently represented to investors through contracts and promotional materials that the investors would be purchasing interests in actual horses that were owned or leased by ClassicStar. But in reality, ClassicStar owned no more than $56 million worth of mares between 2001 and 2004, even as it was selling an average of $150 million worth of mare leases during each of those years. By the end of 2004, the difference between the value of the mares owned by ClassicStar and the value of the mare leases sold to investors was approximately $270 million.

To disguise the shortfall and convince investors that they were purchasing interests in actual horses, Defendants substituted less valuable quarter-horses for the Thoroughbreds that were supposed to be part of the packages, and in many cases, simply did not name the horses that investors believed they were purchasing. In a cross-claim against the Plummers, ClassicStar and GeoStar acknowledged that the practice of substituting quarter-horse pairings was part of a fraudulent scheme to disguise the overselling of interests in the Mare Lease Program. (R. 58, ¶¶ 24-32.) The district court considered evidence that Defendants never intended to fulfill the mare lease obligations with these quarter-horses, but rather used them only as placeholders to facilitate fraudulent tax deductions. (See R. 1701, Ex. 42.)

The evidence is persuasive that the GeoStar defendants were aware that the Mare Lease Program was dramatically oversold. Defendants argue — as they have throughout this litigation — that the real culprits in the fraudulent scheme were David and Spencer Plummer, both of whom have since pleaded guilty to various federal tax fraud charges. However, the evidence showed that each of the individual defendants was aware of the huge gap between the value of horses owned by ClassicStar and the value of the Mare Lease Program interests being sold to investors. Shane Plummer, another of David Plummer’s sons employed by ClassicStar, testified that he discussed the shortfall a number of times with Ferguson, who understood that the quarter-horse pairings were being listed only on paper with the expectation that they would be exchanged for other interests at a later time. (R. 1701, Ex. 30, at 72-84.) Other evidence showed that Classic Star and GeoStar principals, including Ferguson and Parrott, knew that investors were being assigned nonexistent placeholder horses until they could be convinced to convert their interests into oil and gas programs.

Considering this evidence, no reasonable juror could accept Defendants’ argument that the Plummers deceived them and concealed the fact that the Mare Lease Program was drastically oversold. Defendants depict the arrangement between ClassicStar and GeoStar as being at arm’s length, with the Plummers operating ClassicStar without the knowledge, input, or control of GeoStar executives. On the contrary, between 2001 and 2004, the chronic shortfall of horses in the Mare Lease Program was a near-constant item of discussion between the Plummers and Ferguson, Robinson, Parrott, and others. In their correspondence, various tactics were suggested to conceal the shortfall from investors, including changing language in the mare lease agreements to make investors’ interests more ambiguous, (R. 1701, Ex. 98, at 3,) and pushing more investors to convert their mare lease interests into Gastar stock, (R. 1701, Ex. 98, at 5.) Based on this evidence, no reasonable juror could 486*486 have believed that Defendants were unaware of the overselling of mare lease interests.

Second, Defendants argue that they had no knowledge of the nature of First Equine Energy Partners, or FEEP. To disguise the fact that ClassicStar did not own enough mares to fulfill its obligations to Mare Lease Program investors, Defendants and the Plummers encouraged the investors to convert their interests in the Program into interests in other companies. One of these companies was FEEP, an investment vehicle that purported to offer investors oil and gas interests combined with various equine interests. In reality, however, FEEP existed solely to allow Defendants and the Plummers to move investors out of the oversold Mare Lease Program when they no longer wished to offer shares in their mining companies. FEEP was never properly funded by GeoStar, and its assets were either small or entirely fictitious.

The uncontroverted evidence submitted by Plaintiffs indicated that neither GeoStar nor its subsidiary, GeoStar Equine Energy, Inc., ever transferred any oil and gas assets to FEEP, even as contrary representations were made to investors. (R. 1701, Ex. 68; Ex. 71, at 4; Ex. 72.) Shane Plummer described conversations with Ferguson regarding GeoStar’s understanding that investors’ quarter-horse interests were not actually being transferred in exchange for interests in FEEP. (R. 1701, Ex. 30, at 206-07.) Rather, the abstract “values” associated with the horses were transferred, but the interests in the horses themselves were not, primarily because many of those quarter-horses existed only on paper. (R. 1701, Ex. 30, at 206-07.)

Contrary to Defendants’ protestations, GeoStar executives were intimately involved in the creation and development of FEEP. Robinson and Parrott helped draft FEEP’s private placement memoranda and sat on its advisory committee, and Ferguson was named its tax partner and president of its managing company. No reasonable juror could conclude that GeoStar and its executives, who were so intimately involved in the creation and management of FEEP, were somehow caught by surprise that FEEP had no assets. Defendants clearly participated in the use of FEEP as a vehicle to further conceal their fraudulent overselling of interests in the Mare Lease Program.

Finally, Defendants criticize the district court’s use of the circumstantial evidence of GeoStar’s financial control of ClassicStar to help establish GeoStar’s intent to defraud Plaintiffs. Defendants again argue that it was ClassicStar and the Plummers who engineered and implemented the Mare Lease Program; GeoStar, according to them, was merely a faraway and unobservant parent. However, the evidence established that GeoStar exercised considerable control over both the finances and the operations of ClassicStar. GeoStar executives, including Ferguson, Robinson, and Parrott, were in near-constant communication with the Plummers. (See, e.g., R. 1701, Ex. 98.) GeoStar controlled ClassicStar’s operating account, which contained virtually all of ClassicStar’s funds. Robinson and Ferguson were co-managers of ClassicStar. Robinson, as CEO and President of GeoStar, made all fundamental decisions regarding Classic Star’s operations and finances, including its management of the Mare Lease Program.

The district court did not rely on this evidence as the exclusive basis for its finding that Defendants intended to defraud Plaintiffs, but merely referenced GeoStar’s considerable operational control over ClassicStar to further undermine Defendants’ argument that the ClassicStar fraud was designed and perpetrated only by the 487*487 Plummers. Considering the evidence of GeoStar’s involvement in the Mare Lease Program, the knowledge of GeoStar executives about the massive overselling of mare lease interests, GeoStar’s participation in the creation of FEEP, and GeoStar executives’ financial and operational control over ClassicStar, Defendants’ assertion that they had no relevant knowledge is thoroughly implausible. At the very least, Defendants acted recklessly “with respect to potentially misleading information,” and no more is required to establish fraudulent intent. See Heinrich, 668 F.3d at 404. Therefore, the district court properly found that Defendants could not establish a genuine dispute regarding their intent to defraud.

B. Causation

Defendants next assert that Plaintiffs did not establish proximate causation. Plaintiffs in a civil RICO action must allege and prove that they were “injured in [their] business or property by reason of a violation of [18 U.S.C. § 1962].” 18 U.S.C. § 1964(c). The Supreme Court has repeatedly held that plaintiffs attempting to assert an injury “by reason of” a RICO violation must demonstrate both but-for causation and proximate causation. Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 653-54, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008) (citing Holmes, 503 U.S. at 268, 112 S.Ct. 1311). Plaintiffs must show “some direct relation between the injury asserted and the injurious conduct alleged.” Holmes, 503 U.S. at 268, 112 S.Ct. 1311. The Supreme Court has emphasized that this provision, like the RICO statute generally, is to be “liberally construed to effectuate [the statute’s] remedial purposes.” Sedima, 473 U.S. at 498, 105 S.Ct. 3275 (quoting Pub.L. No. 91-452, § 904(a), 84 Stat. 947).

Although civil RICO plaintiffs must establish proximate causation, they need not necessarily show that they relied on any misrepresentations.[3] See Bridge, 553 U.S. at 661, 128 S.Ct. 2131. Plaintiffs need only show that the defendants’ wrongful conduct was “a substantial and foreseeable cause” of the injury and the relationship between the wrongful conduct and the injury is “logical and not speculative.” Trollinger v. Tyson Foods, Inc., 370 F.3d 602, 615 (6th Cir.2004). Defendants argue that they could not have caused any losses because Plaintiffs were well-aware of various aspects of the Mare Lease Program fraud. Because Plaintiffs were knowing participants in the scheme to obtain fraudulent tax deductions, the argument goes, Defendants’ conduct could not have been a “substantial and foreseeable cause” of Plaintiffs’ losses.

First, Defendants point to evidence that a number of the Plaintiffs were aware that the Thoroughbreds originally destined for their mare lease packages were being replaced with less valuable quarter-horses. But this knowledge is immaterial. The fraud was predicated on Plaintiffs being misled into believing that the value of their mare lease packages was what they had paid for them; it had nothing to do with the types of horses that were populating the packages. Some of the Plaintiffs undoubtedly were aware that their mare lease packages contained quarter-horses; indeed, one of the Plaintiffs specifically requested quarter-horses. (R. 1815, Ex. 6, 488*488 at 258.) However, Plaintiffs were never told that the Mare Lease Program did not contain anywhere near enough horses — Thoroughbreds or quarter-horses — to fulfill their mare lease packages. There is no genuine dispute that Defendants concealed the massive overselling of mare lease interests.

Second, Defendants assert that Plaintiffs knew of the cozy relationship between ClassicStar and NELC. This knowledge, they say, should have given Plaintiffs notice that the tax deductions were not legitimate. The Tax Code permits the deduction of certain business expenses when the money used in the transaction was obtained through financing, but only when those funds are actually “at risk,” meaning either that the taxpayer is personally liable for the repayment of the loan, or the loan is secured by an unrelated piece of property. See 26 U.S.C. § 465(b)(2). The Code specifies that funds are not considered at risk if they are borrowed from an entity with an interest in the business activity, a related entity, or a “related person … engaged in trades or business under common control.” Id. § 465(b)(3).

The question is not whether NELC and ClassicStar were actually related entities within the meaning of the Tax Code, thus rendering Plaintiffs’ tax deductions improper. The question is whether Plaintiffs knew that they would not be personally liable for the loans or that NELC and ClassicStar were related in a way that would disqualify their deductions. Some of the Plaintiffs were indeed aware that NELC and ClassicStar were affiliated in some way, but there was no evidence that any of the Plaintiffs knew that ClassicStar provided all of NELC’s funds or that they would not be required to repay their NELC loans. Spencer Plummer told one of the Plaintiff’s financial advisors that because his uncle, Gary Thomson (David Plummer’s brother-in-law), owned and operated NELC, “we can control him and what he does.” (R. 1701, Ex. 7, at 8.) But this information is not materially related to whether Plaintiffs’ funds were “at risk” within the meaning of the Tax Code.

Plaintiffs may have believed that ClassicStar could influence NELC to set favorable loan terms, but they could not have known that NELC was simply a conduit through which ClassicStar funds flowed in a three-way sham transaction. At all times, Defendants referred to NELC as “a national lender on approved credit,” (R. 1701, Ex. 9, at 7,) thus concealing its true nature. Furthermore, although some of the Plaintiffs believed that their long-term NELC loans would be repaid with the proceeds of their investments with GeoStar and ClassicStar, (see R. 1713, at 5-6,) there is no evidence that any of the Plaintiffs thought their loans would be forgiven altogether. Without some indication that Plaintiffs had knowledge of a fact that would disqualify the tax deductions under the Tax Code’s at-risk rules, Defendants cannot establish a genuine issue of material fact on this basis.[4]

Third, Defendants challenge the claim that Plaintiffs were deceived by opinion letters prepared by law firms that had an undisclosed financial relationship with ClassicStar. Defendants argue that those opinion letters did in fact disclose that ClassicStar’s law firms, Hanna Strader 489*489 and Handler Thayer, were to be paid by ClassicStar for preparing the letters. Furthermore, the letters warned that the firms had “a financial incentive for clients to participate” in the Mare Lease Program. (R. 1888, Ex. 4, at 12.) However, both law firms led Plaintiffs to believe that their financial incentives were based on the preparation of opinion letters, when they were actually receiving commissions based on a percentage of Plaintiffs’ mare lease purchases. To conceal these incentives from Plaintiffs, Hanna Strader drew up documentation referring to the commissions as “legal fees” instead of “commissions.” (R. 1701, Ex. 19, at 78-79.)

Because of these misrepresentations and half-truths, Plaintiffs would have had no reason to doubt the legitimacy of their promised tax deductions, and certainly no reason to request an audit of the Mare Lease Program’s assets. One of the Plaintiffs, Bryan Nelson, did have Hanna Strader’s opinion letter reviewed by KPMG, an outside accounting firm, and that firm raised no red flags about the tax deductions themselves, concluding that it would sign and submit Nelson’s tax return. (R. 1815, Ex. 18.) KPMG did recommend that another law firm examine the Program, but only to protect Nelson from the possible imposition of accuracy-related penalties by the IRS, not because it had any doubt about the legitimacy of the Mare Lease Program itself. Defendants presented no evidence that any of the Plaintiffs knew or should have known that ClassicStar’s law firms had given advice about the tax treatment of their investments without properly vetting the Program.

Finally, Defendants argue that Plaintiffs knew that FEEP had no assets and was being used merely as a tool for Plaintiffs to pay off their NELC debt. This argument is particularly weak. Plaintiffs do not dispute that they believed the FEEP conversions would provide them an attractive alternative investment to the Mare Lease Program — with additional promised tax benefits. Plaintiffs were also told that the return on their investments in FEEP could be used to pay off their NELC loans. For any such return to materialize, however, Defendants would have had to actually transfer oil and gas interests into FEEP, but they never did so. Plaintiffs could not have known that FEEP owned virtually no assets, nor could they have known that their investments in FEEP would ultimately prove worthless.

Defendants have not established the existence of any disputed issues of material fact with respect to whether their fraudulent conduct was “a substantial and foreseeable cause” of Plaintiffs’ losses. Plaintiffs’ limited knowledge about various aspects of the fraudulent scheme was largely irrelevant to their decisions to do business with Defendants. Rather, those decisions were proximately caused by numerous and repeated misrepresentations by Defendants and others in which the key pieces of information — the overselling of mare lease interests and the illusory nature of NELC and FEEP — were never disclosed. Plaintiffs were undoubtedly engaged in an attempt to take advantage of the arcane and often labyrinthine nature of the U.S. Tax Code, but their project was a lawful one.[5] The investors could not have known that Defendants 490*490 were using their interest in tax savings to fraudulently channel money into GeoStar’s oil and gas projects. In the absence of any genuinely disputed issues of material fact, the district court properly found that Defendants’ conduct proximately caused Plaintiffs’ injuries.

C. Existence of a RICO “Enterprise”

Defendants next challenge the existence of a qualifying RICO enterprise. The RICO statute makes it unlawful for “any person … associated with any enterprise… to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.” 18 U.S.C. § 1962(c). A RICO “person” can be either an individual or a corporation. Id. § 1961(3). A RICO “`enterprise’ includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” Id. § 1961(4). The enterprise itself is not liable for RICO violations; rather, the “persons” who conduct the affairs of the enterprise through a pattern of racketeering activity are liable. United States v. Philip Morris USA, Inc., 566 F.3d 1095, 1111 (D.C.Cir.2009). To establish liability under § 1962(c), a plaintiff “must allege and prove the existence of two distinct entities: (1) a `person’; and (2) an `enterprise’ that is not simply the same `person’ referred to by a different name.” Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161, 121 S.Ct. 2087, 150 L.Ed.2d 198 (2001).

This principle is known as the “non-identity” or “distinctness” requirement. Begala v. PNC Bank, Ohio, N.A., 214 F.3d 776, 781 (6th Cir.2000). “Under RICO, a corporation cannot be both the `enterprise’ and the `person’ conducting or participating in the affairs of that enterprise.” Id. As we explained in Begala:

Under the “non-identity” or “distinctness” requirement, a corporation may not be liable under section 1962(c) for participating in the affairs of an enterprise that consists only of its own subdivisions, agents, or members. An organization cannot join with its own members to undertake regular corporate activity and thereby become an enterprise distinct from itself.

Id. If RICO imposed liability on a corporation for the ordinary conduct of its agents and employees, every claim of corporate fraud would automatically become a violation of RICO. See Fitzgerald v. Chrysler Corp., 116 F.3d 225, 226 (7th Cir.1997) (“The courts have excluded this far-fetched possibility by holding that an employer and its employees cannot constitute a RICO enterprise.”).

The federal courts have encountered significant conceptual difficulties when attempting to apply the distinctness requirement in the context of complex relationships among affiliated and non-affiliated corporations and individuals. See, e.g., Haroco, Inc. v. Am. Nat’l Bank & Trust Co. of Chicago, 747 F.2d 384, 401 (7th Cir.1984) (“Discussion of this person/enterprise problem under RICO can easily slip into a metaphysical or ontological style of discourse — after all, when is the person truly an entity `distinct’ or `separate’ from the enterprise?”). While all courts agree that a corporation cannot be both a RICO “person” and the “enterprise” whose affairs are conducted by that person, see Cedric Kushner, 533 U.S. at 161-62, 121 S.Ct. 2087, courts disagree over when and whether a corporate parent can be liable under RICO for participating in an association-in-fact that consists of itself, its owners and employees, and its subsidiaries. Compare Fitzgerald, 116 F.3d at 227-28 (finding that the Chrysler Corporation was not a “person” distinct from the “enterprise” 491*491 consisting of Chrysler and its dealerships and agents) with Fleischhauer v. Feltner, 879 F.2d 1290, 1297 (6th Cir.1989) (finding that an individual and his wholly-owned corporations together constituted an “enterprise”).

Plaintiffs alleged that Defendants conducted the affairs of an association-in-fact enterprise, which they label the “ClassicStar Enterprise,” consisting of each of the Defendants in this appeal, as well as numerous other entities, including Gastar, the Plummers, and NELC. Plaintiffs assert that this group of corporations and individuals formed an association-in-fact enterprise whose affairs were conducted by each of the persons who comprised the enterprise, with the goal of funneling investors’ money through the Mare Lease Program and into other interests that they controlled. Defendants dispute the existence of an enterprise sufficiently distinct from GeoStar itself. They argue that the associated entities are in reality merely GeoStar’s agents and subsidiaries, and therefore that RICO’s distinctness requirement cannot be satisfied.

The number of different approaches to the distinctness analysis roughly mirrors the number of cases that have addressed it. The analysis is so fact-intensive that a generic test is difficult to formulate. The cases run the gamut: some consider a parent corporation and its subsidiaries to be distinct from a RICO enterprise if the parent and the subsidiaries play different roles in the scheme, Lorenz v. CSX Corp., 1 F.3d 1406, 1412 (3d Cir.1993); some ask whether the corporate persons are distinct from the enterprise in the way that RICO envisions, Fitzgerald, 116 F.3d at 227; and some require that plaintiffs establish differences in corporate decision-making structures and show businesses sufficiently delineated to justify the conclusion that the alleged RICO activity is not the activity of a single, composite entity, see Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344-45 (2d Cir.1994).

Our approach has not been completely clear. In Fleischhauer v. Feltner, 879 F.2d 1290 (6th Cir.1989), we seemed to take into account only whether the corporate defendant “person” was legally distinct from the alleged RICO enterprise. Id. at 1296-97. The plaintiff in Feltner alleged the existence of an enterprise comprised of a number of companies, all owned by one individual defendant. The defendant argued that because he owned 100% of the corporations, “they were the equivalent of his `right arm,’ with whom he could not `conspire.'” Id. at 1297. We rejected the defendant’s argument, finding that “the fact that [the individual defendant] owned 100% of the corporations’ shares does not vitiate the fact that these corporations were separate legal entities.” Id.

In Davis v. Mutual Life Insurance Co. of New York, 6 F.3d 367 (6th Cir.1993), we seemed to take a more functionalist approach. In a scheme vaguely similar to that which was perpetrated by Defendants in this case, an insurance agent named Fletcher, his insurance agency, and the Mutual Life Insurance Company of New York (“MONY”) sold insurance policies by emphasizing the tax advantages that could be realized if certain deductions were taken. Id. at 371. After the IRS disallowed these deductions, the investors sued MONY and Fletcher under RICO, alleging that they had acted as RICO “persons” to conduct the affairs of Fletcher’s insurance agency as an “enterprise” through a pattern of racketeering activity. Id. at 372. MONY argued that the distinctness requirement had not been met because Fletcher and the agency were merely MONY’s agents and therefore were indistinct from MONY itself. Id. at 377. 492*492 Rather than asking whether the entities were legally distinct, as we had in Fletcher, we evaluated whether they were factually distinct. Id. Finding that they were, we found that RICO’s distinctness requirement was satisfied, notwithstanding the fact that the agency and Fletcher had acted as MONY’s agents. Id. at 377-78.

We have not addressed the question of distinctness in the context of corporate relationships since Davis was decided in 1993. The law in this area has slowly developed in other circuits, with no clear test or style of analysis emerging. Most courts have rejected the separate-legal-identity theory used in Feltner, reasoning that if a corporate defendant can be liable for participating in an enterprise comprised only of its agents — even if those agents are separately incorporated legal entities — then RICO liability will attach to any act of corporate wrong-doing and the statute’s distinctness requirement will be rendered meaningless. See, e.g., Riverwoods, 30 F.3d at 344 (“Because a corporation can only function through its employees and agents, any act of the corporation can be viewed as an act of such an enterprise, and the enterprise is in reality no more than the defendant itself.”).

In 2001, the Supreme Court seemed to revive the separate-legal-identity theory, if only in the narrow context of a corporation wholly owned by a single individual. In Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 121 S.Ct. 2087, 150 L.Ed.2d 198 (2001), the Court found that the defendant, Don King, was distinct from his wholly-owned corporation for the purposes of RICO. The Court found that because the individual defendant and his corporation were separate legal entities with “different rights and responsibilities,” the two were sufficiently distinct. See id. (“[W]e can find nothing in [RICO] that requires more `separateness’ than that.”).

Out of the meandering and inconsistent case law from this and other circuits, as well as the Supreme Court’s decision in Cedric Kushner, two important principles emerge: 1) individual defendants are always distinct from corporate enterprises because they are legally distinct entities, even when those individuals own the corporations or act only on their behalf; and 2) corporate defendants are distinct from RICO enterprises when they are functionally separate, as when they perform different roles within the enterprise or use their separate legal incorporation to facilitate racketeering activity. Applying these principles in this case reveals that each Defendant is sufficiently distinct from the RICO enterprise to satisfy the statute’s distinctness requirement.

1. GeoStar Was Distinct From the Enterprise

Defendants do not challenge the district court’s finding that an enterprise did in fact exist, nor could they easily do so given the Supreme Court’s repeated admonitions that the term “enterprise,” like the RICO statute itself, should be interpreted broadly. See Boyle v. United States, 556 U.S. 938, 944, 129 S.Ct. 2237, 173 L.Ed.2d 1265 (2009) (“[T]he very concept of an association in fact is expansive.”); Scheidler, 510 U.S. at 257, 114 S.Ct. 798 (“RICO broadly defines `enterprise.'”); Sedima, 473 U.S. at 497, 105 S.Ct. 3275 (“RICO is to be read broadly.”). Defendants challenge only the district court’s conclusion that the enterprise was distinct from GeoStar itself. Defendants argue that the enterprise consisted only of GeoStar’s agents, subsidiaries, and affiliates. Consequently, they claim that GeoStar cannot be liable under RICO because it cannot be both a RICO “person” and the “enterprise” whose affairs are conducted by that person.

493*493 Two of the key participants in the enterprise were corporate entities that GeoStar dominated and controlled: Gastar and ClassicStar, LLC. Typically, a parent corporation and its subsidiaries do not satisfy the distinctness requirement because they cannot form an enterprise distinct from the parent. See, e.g., Riverwoods, 30 F.3d at 344. However, the distinctness requirement may be satisfied when the parent corporation uses the separately incorporated nature of its subsidiaries to perpetrate a fraudulent scheme. See Bucklew v. Hawkins, Ash, Baptie & Co., 329 F.3d 923, 934 (7th Cir.2003) (finding that a corporate defendant is distinct from an enterprise consisting of itself and its subsidiaries when “the enterprise’s decision to operate through subsidiaries rather than divisions somehow facilitate[s] its unlawful activity”); Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 263-64 (2d Cir.1995) (finding that related corporations with distinct markets and roles in the scheme were distinct from the RICO enterprise comprised of each of them together). It would be strange indeed to absolve a parent corporation of liability for doing precisely what RICO was designed to prevent: the use of an association of legally distinct entities “as a vehicle through which unlawful … activity is committed.” Cedric Kushner, 533 U.S. at 164, 121 S.Ct. 2087 (internal quotation marks omitted).

GeoStar and each of its subsidiaries performed distinct roles that helped facilitate the fraudulent scheme. GeoStar’s role was that of an external, financially stable guarantor that stood behind the various conversion opportunities, including FEEP, that were presented to investors to help conceal the overselling of mare lease interests and to encourage the flow of cash through the Mare Lease Program to other investments. According to uncontroverted expert testimony provided by Plaintiffs, ClassicStar’s role was to “provide a funding source for GeoStar that was attractive to investors.” (R. 1701, Ex. 22, at 11.) Defendants admit that GeoStar brought to the table its traditional business expertise in oil and gas mining, while ClassicStar contributed its expertise in horse breeding. See Appellant’s Br. 53-54. GeoStar needed the reputation, know how, experience, and legitimacy of the Plummers and ClassicStar in order to entice investors into the Mare Lease Program. Gastar’s role was to provide a mechanism for concealing the shortage of horses in the Mare Lease Program by offering investors an alternative investment in the form of publicly traded stock. Because the enterprise successfully carried out its fraudulent scheme by enlisting the participation of GeoStar and its separately incorporated subsidiaries, with each playing a key role, we conclude that the enterprise was sufficiently distinct from GeoStar itself.

2. The Enterprise Consisted of More Than Just GeoStar Subsidiaries

Even if GeoStar were not considered distinct from Gastar and ClassicStar, the alleged RICO enterprise was comprised of other entities that were neither owned by GeoStar nor acting as its agents. The key player that falls into this category is NELC, whose owner and sole employee was David Plummer’s brother-in-law, Gary Thomson. By facilitating oversized tax deductions, NELC was an important part of the scheme to lure investors into the Mare Lease Program. There is no question that GeoStar neither owned nor directly controlled NELC, even though it obviously influenced its activities through Thomson. NELC’s ostensible status as an independent third-party lender was used to convince investors that ClassicStar’s financing scheme was legitimate. As with ClassicStar and Gastar, NELC’s separate corporate existence and purported independence 494*494 were key aspects of the fraudulent scheme. On this basis alone, the district court properly concluded that the enterprise and GeoStar were distinct.[6]

Because the district court correctly found that each of the Defendants was distinct from the alleged RICO enterprise, it properly held each of them liable under RICO, either as individually culpable RICO “persons,” or by holding the corporations vicariously liable for the RICO violations of their employees. See Davis, 6 F.3d at 379-80 (applying standard vicarious liability principles in the RICO context, provided that the corporate defendants are distinct from the RICO enterprise). Defendants have introduced no evidence that would create a genuine dispute about any material facts, and the district court properly concluded that Plaintiffs were entitled to judgment as a matter of law.

II. State Law Claims

In addition to violating RICO, Plaintiffs alleged that Defendants are liable under Kentucky state law for fraud and breach of contract. Plaintiffs argued, and the district court found, that Defendants knowingly misrepresented the nature of the Mare Lease Program and other related investment programs, and that Plaintiffs relied on those fraudulent representations to their detriment, thus satisfying the definition of fraud in Kentucky. See United Parcel Serv. Co. v. Rickert, 996 S.W.2d 464, 468 (Ky.1999). The district court further found that GeoStar was liable for the breaches of mare lease agreements by ClassicStar — breaches that Defendants apparently do not dispute. We agree with the district court that Defendants are liable under these common law theories, but we decline to conduct an exhaustive review of these claims because Plaintiffs will be fully compensated by the RICO damages awarded by the district court. Regardless of the theory of liability, Plaintiffs losses remain the same. Having upheld the district court’s judgment on the RICO claim, any further damages would be duplicative. See Best v. Cyrus, 310 F.3d 932, 936 (6th Cir.2002) (declining to address an alternative theory of liability after finding in a plaintiff’s favor on a parallel theory).

III. Prejudgment Interest

We review for an abuse of discretion the district court’s decision to award prejudgment interest. Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 333 (6th Cir.2007). An abuse of discretion arises when the reviewing court is left with the “definite and firm conviction that the trial court committed a clear error of judgment. A district court abuses its discretion when it relies on clearly erroneous findings of fact, or when it improperly applies the law or uses an erroneous legal standard.” United States ex rel. A+ Homecare, Inc. v. Medshares Mgmt. Group, Inc., 400 F.3d 428, 450 (6th Cir.2005).

As a general matter, prejudgment interest is intended to make the plaintiff 495*495 whole; it “is an element of complete compensation.” EEOC v. Wilson Metal Casket Co., 24 F.3d 836, 842 (6th Cir.1994) (examining prejudgment interest in the context of Title VII); see also Shelby Cnty. Health Care Corp. v. Majestic Star Casino, 581 F.3d 355, 376 (6th Cir.2009) (finding that in the ERISA context, an award of prejudgment interest is “compensatory, not punitive”). There is virtually no Sixth Circuit case law describing the standards for awarding prejudgment interest in the context of RICO. However, when defendants are found liable under other federal statutes like ERISA, we have held that where the statute does not mandate the award of prejudgment interest, “the district court may do so at its discretion in accordance with general equitable principles.” Shelby Cnty. Health Care, 581 F.3d at 376; see also Frymire v. Ampex Corp., 61 F.3d 757, 774 (10th Cir. 1995) (finding that an award of prejudgment interest for violations of the federal WARN Act should reflect “fundamental considerations of fairness”).

The Second Circuit has held that the decision to award prejudgment interest “should be a function of (i) the need to fully compensate the wronged party for actual damages suffered, (ii) considerations of fairness and the relative equities of the award, (iii) the remedial purpose of the statute involved, and/or (iv) such other general principles as are deemed relevant by the court.” Wickham Contracting Co. v. Local Union No. 3, IBEW, AFL-CIO, 955 F.2d 831, 833-34 (2d Cir. 1992). Because prejudgment interest is compensatory in nature, it should not be awarded if it would result in the overcompensation of the plaintiff. Id. at 834. “Similarly, prejudgment interest should not be awarded if the statutory obligation on which interest is sought is punitive in nature.” Id.

Although the Supreme Court has not squarely decided this issue, it has strongly suggested that a treble-damages award under RICO is not punitive in nature. Like treble-damages provisions under the antitrust laws, the damages provision in RICO is “remedial in nature.” PacifiCare Health Sys., Inc. v. Book, 538 U.S. 401, 406, 123 S.Ct. 1531, 155 L.Ed.2d 578 (2003) (distinguishing RICO from treble damages under the False Claims Act, which are “essentially punitive in nature”). RICO damages are “designed to remedy economic injury by providing for the recovery of treble damages, costs, and attorney’s fees.” Agency Holding Corp. v. Malley-Duff & Assoc., Inc., 483 U.S. 143, 151, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987). “Although there is some sense in which RICO treble damages are punitive, they are largely compensatory in the special sense that they ensure that wrongs will be redressed in light of the recognized difficulties of itemizing damages.” Liquid Air Corp. v. Rogers, 834 F.2d 1297, 1310 n. 8 (7th Cir. 1987). Because RICO is essentially compensatory in nature, prejudgment interest awards are not categorically inappropriate, as Defendants assert.

Indeed, courts have held that because RICO is essentially compensatory and contains no provision barring prejudgment interest, any such award is within the district court’s sound discretion. See Maiz v. Virani, 253 F.3d 641, 663 n. 15 (11th Cir. 2001); Abou-Khadra v. Mahshie, 4 F.3d 1071, 1084 (2d Cir.1993) (describing the district court’s discretion as “broad”). Some courts choose to deny requests for prejudgment interest in cases where plaintiffs already stand to receive treble damages under RICO, reasoning that the trebled damages are sufficient to adequately compensate plaintiffs for their losses. See, e.g., Bingham v. Zolt, 810 F.Supp. 100, 101-02 (S.D.N.Y.1993) (finding that a 496*496 RICO treble damages award “obviates the need to award prejudgment interest”); Nu-Life Constr. Corp. v. Bd. of Educ. of N.Y., 789 F.Supp. 103, 105 (E.D.N.Y.1992). Other courts have found such awards are appropriately coupled with treble damages under RICO. See Allstate Ins. Co. v. Palterovich, 653 F.Supp.2d 1306, 1328 (S.D.Fla. 2009); D’Orange v. Feely, 894 F.Supp. 159, 163 (S.D.N.Y.1995). At least one district court, in a case involving a large and complex financial fraud involving RICO claims and state-law fraud claims, chose to award prejudgment interest on the plaintiffs’ state-law claims but not on their federal RICO claim. See In re Crazy Eddie Sec. Litig., 948 F.Supp. 1154, 1166-67 (E.D.N.Y.1996). In short, the district court has considerable discretion to fashion a prejudgment interest award in the RICO context.

Prejudgment interest may be particularly appropriate “where treble damages do not adequately compensate a plaintiff for the actual damages suffered, or where a defendant has sought unreasonably and unfairly to delay or obstruct the course of litigation.” Bingham, 810 F.Supp. at 102. Plaintiffs argue that Defendants did attempt, at virtually every turn, to delay and obstruct the course of this litigation. None of the individual Defendants agreed to offer testimony, instead asserting their Fifth Amendment rights. They had every right to refuse to testify, of course, but Defendants then denied Plaintiffs other avenues of discovery. For example, the designees of two of GeoStar’s subsidiaries were scheduled to be deposed in August 2009. Without any warning, the representatives simply failed to appear on the morning of the deposition, having notified their counsel 45 minutes before that they were unwilling to testify. (See R. 1331, at 2.) No explanation was ever offered for this failure.

A particularly egregious example of Defendants’ obstruction occurred when GeoStar’s designated witness, its accountant William Bolles, failed to appear for the second and third days of his scheduled deposition. (R. 2441, at 2.) Because each of the other GeoStar principals had refused to testify, Bolles’ deposition was extremely important to the development of Plaintiffs’ case. The district court sanctioned GeoStar for this failure, finding that Plaintiffs’ ability to conduct meaningful discovery into GeoStar’s conduct was prejudiced as a result. If we were deciding in the first instance whether these discovery abuses warranted an award of prejudgment interest, we may have chosen not to impose them. However, the discretion to award interest is not ours, but the district court’s.[7] Because Defendants unfairly delayed the course of litigation and because they provide no strong arguments for why prejudgment interest was inappropriate in this case, the district court did not abuse its “broad discretion” in awarding prejudgment interest to Plaintiffs.[8]

497*497 Alternatively, Defendants argue that even if an award of prejudgment interest was appropriate, it should have been calculated at the federal interest rate rather than the much higher Kentucky statutory interest rate of 8%. While it is well-accepted that a federal court sitting in diversity should use the state-law interest rate when awarding prejudgment interest, Gentek Bldg. Prods., 491 F.3d at 333, a federal court hearing a federal claim should apply federal common law rules, see Snow v. Aetna Ins. Co., 998 F.Supp. 852, 856 (W.D.Tenn.1998). Although this may give Defendants some hope, district courts are free to use state law to calculate prejudgment interest even on federal claims. See Ford v. Uniroyal Pension Plan, 154 F.3d 613, 619 (6th Cir.1998). We have held that the method for calculating prejudgment interest remains in the discretion of the district courts, and they are free to “look to state law for guidance in determining the appropriate prejudgment interest rate” if they so choose. Id.; see also Smith v. Am. Int’l Life Assurance Co. of N.Y., 50 F.3d 956, 958 (11th Cir.1995). But see Thomas v. iStar Fin., Inc., 652 F.3d 141, 150 (2d Cir.2010) (applying the federal rate to judgments based on combined federal and state claims).

Defendants provide no reason why the Kentucky statutory interest rate would result in overcompensation to Plaintiffs. Cf. Ford, 154 F.3d at 618-19 (finding that the Michigan statutory rate was inappropriate because legislative history showed that it was partially punitive in nature). As with the district court’s decision to impose prejudgment interest, the method for calculating it lies within that court’s discretion. Because of the expansive nature of the fraud in this case and Defendants’ unfair obstruction of the pretrial proceedings below, we find that the district court did not abuse its discretion when it awarded prejudgment interest at the Kentucky statutory interest rate.

CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s grant of summary judgment.

MERRITT, Circuit Judge, concurring in part and dissenting in part.

I. Seventh Amendment Requirements

This case, in which the trial court awarded a summary judgment of $65 million to the plaintiffs, is about the role of judge and jury in a constitutional system requiring that, in civil trials of legal claims in federal court, “the right of trial by jury shall be preserved.” U.S. Const. amend. VII.[1] The district court claimed for itself the determination that the defendants caused the plaintiffs $16.5 million in damages — a figure quadrupled to $65 million after application of RICO’s treble damages provision and the addition of $15.6 million prejudgment interest — despite substantial evidence that the plaintiffs were themselves at least partly to blame for their losses. Specifically, there is evidence that would allow a reasonable jury to find that the plaintiffs invested not because of the defendants’ misrepresentations but rather because of their own greed for tax deductions. The majority now sanctions the district court’s error and fails to even discuss the summary judgment and Seventh Amendment issues. The legitimacy of summary judgment 498*498 ceases when it devolves into “trial by affidavits.” It remains a bedrock principle that “[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

As the Supreme Court long ago explained,

Twelve men of the average of the community, comprising men of education and men of little education, men of learning and men whose learning consists only in what they have themselves seen and heard, the merchant, the mechanic, the farmer, the laborer; these sit together, consult, apply their separate experience of the affairs of life to the facts proven, and draw a unanimous conclusion…. It is assumed that twelve men know more of the common affairs of life than does one man, that they can draw wiser and safer conclusions from admitted facts thus occurring than can a single judge.

R.R. Co. v. Stout, 84 U.S. (17 Wall.) 657, 664, 21 L.Ed. 745 (1874). In keeping with this sentiment, the Supreme Court has continually vindicated the Seventh Amendment against whatever novel procedural device has arisen in the name of efficiency and saving time and effort. “Maintenance of the jury as a fact-finding body is of such importance and occupies so firm a place in our history and jurisprudence that any seeming curtailment of the right to a jury trial should be scrutinized with the utmost care.” Dimick v. Schiedt, 293 U.S. 474, 486, 55 S.Ct. 296, 79 L.Ed. 603 (1935) (holding additur unconstitutional).[2]

Although the district court intoned the familiar summary judgment standards, its opinion does not evidence any real engagement with the record or with the conflicting inferences that might be drawn from that record. The opinion reads as if the district court had tried the case itself. On the question of damages, in particular, the court simply accepted the plaintiffs’ theory of the case because it saves time to avoid a trial. That is impermissible summary-judgment procedure.

I would not object if my colleagues had limited summary judgment to the question of the defendants’ fraudulent intent. The defendants failed to call their knowledge into dispute with affidavits, and there is no other evidence to support the defendants’ version of events. The inference the defendants suggest — that they knew nothing of the horse fraud — finds no support in the record. The same cannot be said of causation, for there is more than enough evidence to support the conclusion that the plaintiffs were motivated primarily by a passion for tax deductions that the law does not allow. The defendants’ misrepresentations were irrelevant, a jury might find. The majority ignores or dismisses evidence that the plaintiffs knew the truth about crucial elements of the mare-lease program. From this evidence a jury might reasonably conclude that the plaintiffs understood or were culpably blind to the illegality of the tax deductions advertised by the defendants. The jury might then further conclude that the plaintiffs 499*499 were not defrauded, but rather that they invited the transaction as an occasion for colorable tax deductions that the IRS might not investigate. And such a conclusion could justify the jury in denying the plaintiffs a judgment.

II. The Factual Issues

The important point about the mare-lease program is that it was not a simple exchange of cash for horses. It was primarily about tax breaks. If the plaintiffs knew those tax breaks were bad — whether because of a lack of economic substance or for some other reason — then the causal link between the defendants’ actions and the plaintiffs’ losses was broken. Though the majority emphasizes that the plaintiffs did not know about the shortfall of horses, that is contested and does not address the major flaws with the tax scheme, the primary reason for the transactions. There are at least four pieces of evidence to support a conclusion that the plaintiffs knew the tax breaks were unsupportable, and that could lead a reasonable jury to find that the plaintiffs’ contribution to their losses should bar recovery.

1. Evidence that the plaintiffs knew National Equine Lending was not independent from ClassicStar. An essential feature of the mare-lease program was its ability to make long-term loans in order to achieve tax-deductible losses for investors. The scheme could hardly be cruder: 1) investor has past income on which he does not wish to pay taxes; 2) investor borrows a sum equivalent to past income; 3) investor uses borrowed funds on horse breeding, thereby creating a farming loss; and 4) investor uses that loss to wipe out past income, thus avoiding taxes. A key tax requirement for this loss-creation mechanism is that the loans come from a lender independent from the corporation to be benefited by the loan proceeds. The loan may not be the risk of a party selling the tax scheme. But there is evidence here that at least two plaintiffs knew National Equine Lending was related to the seller, ClassicStar. Plaintiff Jaswinder Grover understood that ClassicStar “had influence over [National Equine Lending’s] interest rates and could — had an association or affiliate thereof.” See R. 1714 at 7 n. 19. Plaintiff Bryan Nelson of Nelson Breeders testified that he “suspected” National Equine Lending was affiliated with ClassicStar because of “some of the level that all the loans seemed to go through [National Equine Lending], the way there was kind of just a bit of a wink and a nod in terms of, you know, you’ve got to appear at risk but not really.” See R. 1713 at 5. Despite knowledge of this flaw that would invalidate a large portion of their tax deductions, the plaintiffs invested anyway. Based on this evidence, a jury could reject the plaintiffs’ inconsistent claims that they would not have invested had they known the tax deductions were unsupportable.

The majority does not find this evidence material, because it does not show that “Plaintiffs knew that ClassicStar provided all of [National Equine Lending’s] funds or that they would not be required to repay their [National Equine Lending] loans.” Op. at 488. But as the plaintiffs’ own expert explained, the tax code precludes a taxpayer from deducting the value of a loan — even when he is personally liable on the debt — if the lender is “related” to a corporation to which the loan proceeds will flow. A lender and a corporation are “related” if they are “engaged in trades or business under common control.” See R. 1701-10 at 41-45 (quoting 26 U.S.C. § 465(c)(3)(C)(ii)). Because independence between lender and beneficiary corporation is required to deduct the value of a loan, it is indeed material that the plaintiffs knew of the relationship between National Equine Lending and ClassicStar.

500*500 2. Evidence that the plaintiffs knew the tax opinions were biased. The plaintiffs argue that they are not lawyers and that the opinions of established tax attorneys justified their investment. However, the plaintiffs were aware of a financial relationship between ClassicStar and the firms that provided the opinions. The firms disclosed that ClassicStar was paying for the opinions. Handler Thayer was especially explicit, stating that “legal fees received from ClassicStar, LLC increase with each transaction entered into by a client,” and that “our firm has a financial incentive for clients to participate.” R. 1888-5 at 12. The majority finds it important that the firms did not disclose, in so many words, that ClassicStar was providing them a “commission,” but disclosed just a payment or fee. The relevance of the distinction between a “fee” and a “commission” in this case escapes me. The plaintiffs knew ClassicStar was paying the firms for the opinions, and they knew the opinions were favorable to ClassicStar’s program in every respect. That evidence is surely sufficient for a jury to find that the plaintiffs knew the lawyers were essentially salesmen of the program. It would be reasonable for a jury to infer from this finding that, by relying only on the opinions of compromised attorneys, the plaintiffs did not invest in good faith.

3. Evidence that one plaintiff willfully ignored advice to seek independent tax counsel. In addition to not getting independent legal advice, at least one plaintiff was confronted with the inadequate nature of the tax opinions, yet hastened to invest. The defendants entered into the record an internal memo from an accountant at KPMG, plaintiff Nelson’s accounting firm. R. 1815-18. This memo assessed the lawyer-salesman’s tax opinion and analyzed the probability that, if he took the deduction in reliance on the opinion, Nelson would be assessed a penalty for underpayment of taxes without “reasonable cause,” per 26 U.S.C. § 6664. The memo concluded that the opinion financed by the sellers did not assess the specific facts of Nelson’s situation and that it appeared to be a “promoter” opinion. Nelson’s accountant advised that he disclose the mare-lease investment to the IRS or obtain a second, fact-based opinion in order to ensure that there was reasonable cause for the deduction. Nelson rejected the advice and “indicated that after consultation with his [promoter] attorneys that he wanted to proceed without disclosing the treatment in his tax return, he would not engage [Hanna Strader] to issue an updated opinion, and he would not engage another law firm to get a second opinion letter.” Id. at 5. From this evidence that Nelson relied on a “promoter” opinion to take an unreasonable tax deduction, the jury could conclude that Nelson caused his own harm.

4. Evidence that the plaintiffs continued to invest despite knowing the defendants had an insufficient number of thoroughbreds. The plaintiffs knew the defendants were giving them quarter horses instead of the promised thoroughbreds. No one disputes that, except the majority which states in footnote 4 that “there is no evidence that Plaintiffs had any knowledge of these facts,” i.e., “the overselling of mare leases.” Yet the plaintiffs continued to invest in the mare-lease program and in some instances reinvested. Their willingness to stick with the defendants regardless of whether they delivered the program’s main profit-making asset could lead a jury reasonably to conclude that the plaintiffs were primarily concerned with tax deductions rather than horse breeding. While the quarter-horse substitution may be immaterial to the question of whether the plaintiffs knew of the program’s undercapitalization (as the majority asserts), it is 501*501 material to the plaintiffs’ state of mind, which in turn reaches the issue of causation. A jury could conclude that the plaintiffs intended to take tax breaks regardless of the investments’ underlying substance. This conclusion, along with the other evidence, could justify a finding that the plaintiffs’ overriding intention to avoid taxes was the real cause of their losses.

In sum, when the evidence is viewed collectively, a colorable version of events favorable to the defendants’ argument on causation emerges. In this scenario, the plaintiffs knew their tax attorneys were selling them a scheme, knew they were not receiving a full complement of thoroughbred foals for racing or sale, knew that the company from which they were taking long-term loans was an arm of ClassicStar in violation of the risk requirements of the tax law, and refused to seek independent counsel on the validity of their tax deductions. Despite the warning signs, the plaintiffs plunged headlong into the marelease program for the tax breaks, heedless of whether those breaks had any legal basis. In this scenario, the cause of the plaintiffs’ losses was not the defendants’ fraud but the plaintiffs’ greed. Perhaps a jury would agree with the version of events that the plaintiffs, the district court, and my colleagues spin. But there is a reasonable basis in the record for the alternative conclusion, and that is all that is required for the defendants to survive summary judgment. The defendants should be permitted an attempt to persuade a jury that the plaintiffs caused their own injuries. On this record, that is what the Seventh Amendment demands.

III. The Prejudgment Interest Award

Given this conclusion, I would vacate the entirety of the $65 million damages and remand the case for trial, as the Seventh Amendment requires. But even if I believed summary judgment for the plaintiffs were warranted, I would vacate the $15.6 million prejudgment interest. Assuming for the sake of argument that prejudgment interest should ever be awarded on top of statutory treble damages, the district court’s award was erroneous under the circumstances. The majority correctly explains that federal law is used to determine prejudgment interest on a federal claim such as RICO, but it fails to acknowledge that the district court did not apply federal law. The district court imposed the state statutory interest rate of eight percent after determining the plaintiffs’ damages were “liquidated” under Kentucky law. But whether damages are “liquidated” — a term that Kentucky apparently applies beyond the normal situation of contractual stipulation — is irrelevant under federal law. Under federal law, whether to award prejudgment interest is a matter of equity guided by the need to ensure full compensation, to avoid overcompensation, and to achieve fairness. See Blau v. Lehman, 368 U.S. 403, 414, 82 S.Ct. 451, 7 L.Ed.2d 403 (1962); Rodgers v. United States, 332 U.S. 371, 373, 68 S.Ct. 5, 92 L.Ed. 3 (1947). While a federal court may consult state law as part of its equitable inquiry, it is manifest error for the court to ignore federal law altogether and to mechanically apply a state statutory rate or a state “liquidated damages” penalty. The majority suggests some rationales by which the district court might have concluded that prejudgment interest at the Kentucky statutory rate was fair, but the district court did not actually rely on those rationales in its opinion. Proper concern for federal equitable standards might have caused the district court to decline to pile $15 million prejudgment interest on top of $16 million actual damages that had already been trebled.

[1] For example, an investment of $2 million might consist of $200,000 in cash, $800,000 in a short-term loan from NELC that would be quickly repaid with the resulting tax refund, and a long-term loan of $1 million from NELC to be repaid with the profits from the Program. (R. 1701, Ex. 16, at 6.)

[2] The parties admit that the specific details of the government’s disallowance of the tax deductions was not contained in the record before the district court. However, Plaintiffs have represented to this Court that the IRS has in fact disallowed all the deductions in question. See Appellees’ Letter Br. 4.

[3] The dissent seems to prefer a standard of causation that would require all RICO plaintiffs to demonstrate reasonable reliance on a defendant’s misrepresentations, but the Supreme Court has rejected such a stringent approach, instead demanding only “some direct relation” between the injury and the defendant’s conduct. Holmes, 503 U.S. at 268, 112 S.Ct. 1311.

[4] Although the dissent focuses almost exclusively on the fact that Plaintiffs’ tax deductions did not comply with the Tax Code’s at-risk rules, it is important to note that the essence of the fraud in this case was the overselling of mare leases and the corresponding lack of economic substance or actual business expenses associated with the Mare Lease Program, two facts that obviously undermine the related tax deductions. (See R. 1701, Ex. 9.) There is no evidence that Plaintiffs had any knowledge of these facts.

[5] The dissent is swayed by what it calls Plaintiffs’ greed and their “passion for tax deductions,” see post, at 497-98, 498, 500-01, but a desire for tax deductions is as American as apple pie. Without material knowledge that they were investing in undervalued or fictitious assets, Plaintiffs cannot be said to have been complicit in the fraud, nor could any reasonable juror dispute the only statutory causation requirement — that Plaintiffs were injured “by reason of” Defendants’ pattern of fraudulent conduct. 18 U.S.C. § 1964(c).

[6] In its reply brief, Defendants assert that NELC and other unaffiliated entities were not part of the “operation or management” of the enterprise’s affairs. However, Defendants misread (or cherry-picked quotes from) our case law to arrive at that conclusion. Following the Supreme Court’s decision in Reves v. Ernst & Young, 507 U.S. 170, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993), we have held that a defendant “participates” in an enterprise’s affairs “either by making decisions on behalf of the enterprise or by knowingly carrying them out.” United States v. Fowler, 535 F.3d 408, 418 (6th Cir.2008). Given the evidence, no reasonable factfinder could conclude that NELC did not knowingly carry out the enterprise’s fraudulent scheme.

[7] Although the dissent suggests that the district court felt compelled to follow Kentucky’s rules regarding interest on “liquidated” claims, it seems to us that the court was merely “look[ing] to state law for guidance,” just as we have suggested it should do. See Ford v. Uniroyal Pension Plan, 154 F.3d 613, 619 (6th Cir.1998).

[8] Defendants’ only argument is that Plaintiffs’ out-of-pocket losses should not include their payments on the short-term loans financed by tax refunds that they only received because of their participation in the Program. This argument is more properly directed at the district court’s calculation of Plaintiffs’ RICO damages, not the decision to award prejudgment interest. Defendants have not challenged the district court’s damages calculation in this appeal.

[1] In full, the Amendment reads, “In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.”

[2] Many judges and legal scholars have recently complained that federal civil procedure — summary judgment in particular — is deviating more and more from Seventh Amendment standards requiring trial by jury. See Judge Mark Bennett’s recent essay on this subject, From the “No Spittin’, No Cussin’ and No Summary Judgment” Days of Employment Discrimination Litigation to the “Defendant’s Summary Judgment Affirmed Without Comment” Days: One Judge’s Four-Decade Perspective, 57 N.Y.L. Sch. L.Rev. 685 (2012-2013).

More than One Victim Needed to Show Predicate Acts

The Second Circuit rejected a claim involving a single victim.
“Crawford argues that the existence of only one victim and one scheme suffices for a `pattern’ where there are repeated economic injuries” (Crawford reply brief on appeal at 25), relying principally on Uniroyal Goodrich Tire Co. v. Mutual Trading Corp., 63 F.3d 516 (7th Cir.1995). But that case, while involving only a single victim, involved fraudulent acts that were numerous, varied, and disparate, 489*489 see id. at 519-20, in contrast to the alleged fraud here, which was to sign Crawford up for a $504,000 mortgage. Thus, while the Seventh Circuit in that case found that such numerous and varied fraudulent acts sufficed to show a pattern of racketeering activity against that lone victim, that court has reasoned that “multiple acts of mail fraud in furtherance of a single episode of fraud involving one victim and relating to one basic transaction cannot constitute the necessary pattern

Crawford v. Franklin Credit 758 F.3d 473 (2014)

Linda D. CRAWFORD, Plaintiff-Counterclaim-Defendant-Appellant
v.
FRANKLIN CREDIT MANAGEMENT CORPORATION, Tribeca Lending Corporation, Defendants-Counterclaimants-Cross-Claimants-Appellees,
Lenders First Choice Agency, Inc., Defendant-Crossclaim-Defendant-Appellee.[*]

Docket No. 13-2514.

United States Court of Appeals, Second Circuit.

Argued: April 7, 2014.

Decided: July 11, 2014.

477*477 Chittur & Associates, Ossining, N.Y., (Krishnan S. Chittur, of counsel), submitted a brief for Plaintiff-Counterclaim-Defendant-Appellant.

Martin C. Bryce, Jr., Philadelphia, PA, (Ballard Spahr, Philadelphia, PA, on the brief), for Defendants-Counterclaimants-Cross-Claimants-Appellees.

Before: KEARSE, JACOBS, and LYNCH, Circuit Judges.

KEARSE, Circuit Judge.

Plaintiff Linda D. Crawford appeals from a judgment of the United States District Court for the Southern District of New York, John F. Keenan, Judge, dismissing her amended complaint (“Complaint”) which alleged that defendants fraudulently procured a mortgage on her home, and thereafter sought to foreclose on that mortgage, in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961 et seq., the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. §§ 1691 et seq., the Truth in Lending Act (“TILA”). 15 U.S.C. §§ 1601 et seq., the New York General Business Law, N.Y. Gen. Bus. Law § 349, and common law. The district court denied a motion by Crawford for partial summary judgment on the issues of liability. The court granted the motions of defendants Franklin Credit Management Corporation (“Franklin”) and Tribeca Lending Corporation (“Tribeca”) for summary judgment dismissing the claims against them, ruling that, because Crawford had failed to disclose these claims in a 2006 proceeding under Chapter 13 of the Bankruptcy Code (“Code”), her present suit was barred for lack of standing or by collateral estoppel. The court noted that defendant Lenders First Choice Agency, Inc. (“Lenders First Choice”), had not been served and did not appear in the action. On appeal, Crawford makes no argument with respect to the dismissal of Lenders First Choice. She principally challenges the district court’s standing and estoppel rulings in favor of Franklin and Tribeca (or “Defendants”) and its denial of her motion for partial summary judgment against them.

For the reasons that follow, we affirm the denial of Crawford’s motion for partial summary judgment in her favor; we vacate so much of the judgment as dismissed Crawford’s TILA and common-law fraud claims against Franklin and Tribeca and remand for further proceedings on those claims; we affirm the dismissal of Crawford’s other claims because, as to each, she failed to adduce evidence sufficient to show a genuine issue of material fact to be tried.

I. BACKGROUND

Except as indicated below, the following facts, taken largely from the parties’ respective statements pursuant to Rule 56.1 of the Local Rules for the Southern District (“Rule 56.1”), are not in dispute.

A. Events in November and December 2004

In 2000, Crawford, a registered nurse and longtime flight attendant, bought a home at 40 Paradise Avenue in Piermont, New York (“40 Paradise”). The purchase was funded with a mortgage loan from Community Home Mortgage Corporation (“Community”); Crawford later took out a line of credit from Chase Bank, secured by a second mortgage on 40 Paradise. In 2003, Crawford enrolled as a full-time student in medical school in the Dominican Republic. Although she also continued to work to some extent as a flight attendant and a nurse, by November 2004 she was in default on her debts to Community and Chase Bank. The total balance on those 478*478 two loans was approximately $400,000, and a foreclosure action on 40 Paradise was commenced by Community.

At the times relevant to this action, Tribeca was a lending company and a wholly owned subsidiary of Franklin. Franklin maintains that it merely serviced loans originated and retained by Tribeca but did not itself make loans. Crawford attributes the allegedly fraudulent mortgage transaction to both Tribeca and Franklin, based in part on documents produced by Defendants.

In November 2004, Tribeca employee Robert Koller telephoned Crawford to discuss the possibility of her obtaining a loan from Tribeca. The two never met, but they had several such telephone conversations, the contents of which are in dispute.

Crawford’s version is that Koller said Franklin and Tribeca were “foreclosure rescuers” and offered to refinance her home. (Plaintiff’s Statement of Undisputed Facts Under Local Rule 56.1 In Support of Plaintiff’s Cross-Motion For Summary Judgment With Respect To Liability of Defendants Franklin Credit and Tribeca Lending (“Crawford’s Rule 56.1 Statement”) ¶ 10.) Crawford told Koller that, because of her full-time-student status and reduced work with the airline, she could not afford to make any monthly payments on a mortgage for at least a year; Koller said he would “tailor” for Crawford a one-year “bridge loan” of $35,000, and that Tribeca would take care of her monthly payments to her mortgagees and stave off foreclosure for a year; thereafter that loan would be converted to a 30-year fixed-rate mortgage loan. (Id. ¶¶ 11-13 (internal quotation marks omitted).) Koller urged Crawford to act on Tribeca’s offer promptly, telling her that since Crawford was an African-American, Community would foreclose very quickly. (See id. ¶ 14.)

According to Crawford, Koller thereafter told her that papers she had submitted were insufficient to show her signature and that he would arrange for someone to meet her at JFK airport, when she was available between flights, so that she could provide “specimen signatures.” (Id. ¶ 21 (internal quotation marks omitted).) As support for her Rule 56.1 assertions, Crawford principally cited her own deposition testimony, along with the allegations in her Complaint, which she had expressly adopted and incorporated by reference in a declaration (see Declaration of Linda Crawford dated July 9, 2010 (“Crawford Decl.”), ¶ 2) submitted “under penalties of perjury.”

In opposition to Crawford’s motion, Franklin and Tribeca submitted, inter alia, a declaration from Koller stating that “[s]everal of the statements” in Crawford’s Rule 56.1 Statement were “not true.” (Declaration of Robert Koller dated August 13, 2010 (“Koller Decl.”), ¶ 4.) Koller, who stated that he had been employed by Tribeca as a loan officer from February 2004 to June 2005, denied telling Crawford that he or Tribeca was a “foreclosure rescuer” and denied that he ever offered her a “bridge loan” or used that term. (Id. ¶¶ 1, 5-6 (internal quotation marks omitted).) Instead, Koller stated that he told Crawford, and always believed she understood, that the loan from Tribeca would result in a mortgage on her property. (See id. ¶ 7.) Koller said he never told Crawford she would not have to make payments on her loan for a year, or that because she was an African-American her lenders would foreclose very quickly. (See id. ¶¶ 8-9.) He also denied telling her that papers she had submitted were deficient and denied that he arranged, or told her that he would arrange, for someone to meet her at the airport to obtain specimen signatures. (See id. ¶¶ 10-11.)

479*479 It is undisputed that on December 11, 2004, Crawford met someone at the airport for the purpose of providing her signature. Here too, however, there are divergent versions as to substance. Crawford stated that she met “Defendants’ representative” and that she “signed some blank pages as requested by Defendants’ representative.” (Crawford’s Rule 56.1 Statement ¶ 23.) She stated that she never requested a mortgage from Franklin or Tribeca but that they, without her knowledge, intent, or consent, “use[d her] signatures to manufacture a mortgage” on her home in the amount of $504,000 (id. ¶¶ 24-26, 28) (the “Tribeca Mortgage”). Crawford said she did not receive copies of any note or mortgage on December 11; she did not receive closing documents concerning the Tribeca Mortgage until June 2007. (See id. ¶ 35.)

Franklin and Tribeca submitted a declaration from Anthony Decarolis, an attorney, who stated that he met with Crawford at the airport on December 11, 2004 (see Declaration of Anthony Decarolis dated July 28, 2010 (“Decarolis Decl.” or “Decarolis Declaration”), ¶¶ 1, 4-6); but Decarolis denied that he asked Crawford to sign any blank pages, saying “I have never requested, nor have I been asked to request, that a borrower sign blank pages” (id. ¶ 10). Rather, although Decarolis said he has never been employed directly by Franklin or Tribeca and could not remember precisely who had first contacted him on this matter, he said he had been retained to handle the closing of Crawford’s mortgage from Tribeca. (See id. ¶¶ 3-4.) That closing took place at JFK airport in Decarolis’s car; no one other than Decarolis and Crawford was present. Decarolis stated that he described the closing documents to Crawford, and she reviewed them before signing them. He said his customary practice, like that of most lenders, was to request that the borrower sign multiple copies of documents, and to give the borrower copies at the closing. Decarolis said he had no reason to believe he deviated from these practices during the closing of Crawford’s loan. (See id. ¶¶ 7-9.)

Of the proceeds from the $504,000 Tribeca Mortgage, a total of $459,102.62 was used to pay off Crawford’s two existing mortgages; $1,400 was used to pay Crawford’s outstanding property taxes; $35,050.86 was used to pay settlement charges on the loan; and $7,196.52 was disbursed to Crawford in cash. Crawford promptly complained to Koller that she had expected to receive $35,000. She asserts — and Koller denies-that he told her the “fees” were higher than expected. (Crawford’s Rule 56.1 Statement ¶ 30 (internal quotation marks omitted); Koller Decl. ¶ 15.)

B. The Tribeca Foreclosure and Crawford’s Bankruptcy Proceedings

By February 2005, Crawford was in default on the Tribeca loan. In September 2005, Tribeca commenced a foreclosure action on 40 Paradise in state court; in August 2006, the court entered a default judgment against Crawford. In October 2006, in order to forestall an imminent foreclosure sale, Crawford, through counsel, filed a petition for bankruptcy (“2006 Petition”) under Chapter 13 of the Code (Crawford’s “First Bankruptcy”). In her schedule of assets filed in connection with the 2006 Petition, Crawford did not list any of the claims she asserts in the present case. Nor did she otherwise disclose these claims during that First Bankruptcy. The 2006 Petition was dismissed in April 2007 after Crawford failed to appear at the scheduled confirmation hearing for her plan for payment to creditors and failed to make payments that were called for in her proposed plan.

480*480 After a second bankruptcy filing by Crawford in June 2007 to prevent the foreclosure sale, and after other protracted proceedings in the state and federal courts delaying the sale, 40 Paradise was eventually sold in foreclosure in 2011.

C. Dismissal of the Present Action

Crawford commenced the present action in July 2008 asserting, to the extent pertinent to this appeal, claims under RICO, ECOA, TILA, and New York General Business Law (“GBL”) § 349, as well as common-law claims of fraud and negligent misrepresentation. She sought damages, injunctive relief, and rescission of the Tribeca Mortgage. Franklin and Tribeca filed a joint answer to the Complaint, denying most of its allegations, and asserted, inter alia, counterclaims against Crawford seeking attorneys’ fees for defense of the present action, and — if Crawford succeeded in having the Tribeca Mortgage rescinded — seeking restitution to Tribeca of the amounts it had paid to satisfy Crawford’s prior mortgages with Community and Chase Bank.

Following discovery, Franklin and Tribeca moved for summary judgment. Tribeca argued, inter alia, that Crawford lacked standing to assert her claims, that several of her claims were time-barred, that her request for rescission was barred by the Rooker-Feldman doctrine and principles of res judicata, and that a number of her claims failed as a matter of law for lack of evidence to prove essential elements of those claims. In contending that Crawford lacked standing, Tribeca argued that although Crawford in her First Bankruptcy petition and filings had failed to disclose her present claims, these claims had automatically become part of the bankruptcy estate upon the filing of the 2006 Petition and passed to the trustee, and that they remained part of the bankruptcy estate after the bankruptcy proceeding was dismissed. Tribeca suggested that only a bankruptcy trustee, not Crawford, would have standing to assert these claims.

Franklin joined Tribeca’s arguments and added that Franklin was also entitled to summary judgment on the grounds that Koller was an employee of Tribeca, not Franklin, that Franklin was not a party to the loan and mortgage transaction, as the only lender was Tribeca, and that Franklin’s status as Tribeca’s corporate parent provided no basis for liability.

Crawford did not deny that she had failed to disclose her present claims in her 2006 bankruptcy; she argued instead that any claims that had belonged to her 2006 bankruptcy estate revested in her when the 2006 bankruptcy proceeding was dismissed. She also disputed the contention of Franklin that it was not a party to the loan or mortgage transactions — and indeed was not a lender at all — by pointing, inter alia, to evidence that the operations of Franklin and Tribeca were intermingled, to Franklin documents from November and December 2004 indicating Franklin’s involvement in the approval of a loan to Crawford, and to a subsequent Franklin document related to her loan and titled “Franklin Credit Loan.”

In addition, Crawford cross-moved for partial summary judgment in her favor on the issues of liability, arguing that Defendants had not sufficiently disputed her version of the 2004 events because, in response to her subpoenas pursuant to Fed. R.Civ.P. 30(b)(6) to take the depositions of Defendants’ agents who could testify on their behalf, Defendants produced only witnesses who testified that they had no knowledge of the negotiations or interactions that preceded the Tribeca Mortgage. She contended that Franklin and Tribeca should therefore be barred from relying on 481*481 the declarations of Koller and Decarolis, citing the so-called sham-affidavit rule, i.e., the principle that a party’s factual assertion in an affidavit opposing summary judgment, contradicting his prior deposition testimony, may be disregarded as a sham attempt to create an issue of fact. Crawford also asked the court to draw inferences adverse to Defendants — and to accept her factual assertions as true — as sanctions for their conduct in discovery.

In an Opinion and Order dated March 23, 2011, the district court denied Crawford’s motion for partial summary judgment in her favor on the issues of liability and granted the motions of Franklin and Tribeca for summary judgment dismissing the action. See Crawford v. Franklin Credit Management Corp., No. 08 Civ. 6293, 2011 WL 1118584 (S.D.N.Y. Mar. 23, 2011) (“Crawford I”). The court declined to draw the adverse inferences requested by Crawford, largely because “Plaintiff ha[d] not adequately shown that Defendants acted with culpable mental states….” Id. at *8. Although Crawford argued that she was entitled to summary judgment as to liability because Defendants had not produced witnesses who could deny her version of the events, the court noted, inter alia, that Koller had not been a Franklin employee and was no longer employed by Tribeca and that Decarolis had never been employed by Tribeca. The court concluded that Crawford could not fault Defendants for no longer having an employee who had knowledge of the negotiations with her or for failing to produce Koller or Decarolis. The court pointed out that Crawford herself could have, but had not, subpoenaed Koller and Decarolis to take their depositions. See id.

The court granted the summary judgment motions of Franklin and Tribeca principally on standing grounds. See Crawford I, 2011 WL 1118584, at *14. As discussed more fully in Part II. A. below, the court concluded that Crawford’s failure to disclose her claims in her 2006 bankruptcy case barred her from asserting them in the present action. See id. at *13-*14. Alternatively, the court stated that as a result of that failure, Crawford’s present claims were barred by collateral estoppel. See id. at *14.

Having decided the summary judgment motions, the district court inadvertently closed the case without dealing with Defendants’ counterclaims. The case was eventually reopened; but it was stayed when the district court was informed that in November 2011 Crawford had commenced a third bankruptcy proceeding. In that proceeding, which was largely concluded in December 2012, the bankruptcy court granted Crawford a discharge from her debts, including those asserted in Defendants’ counterclaims.

In 2013, Crawford moved in the district court pursuant to Fed.R.Civ.P. 60(b) for reconsideration of the Crawford I ruling that she lacked standing to pursue, or was estopped from pursuing, her present claims. In an Opinion and Order dated June 14, 2013, see Crawford v. Franklin Credit Management Corp., No. 08 Civ. 6293, 2013 WL 2951957 (S.D.N.Y. June 14, 2013) (“Crawford II”), the court denied the motion. After being informed that Defendants’ counterclaims had been discharged by the bankruptcy court, the court entered final judgment. This appeal followed.

II. DISCUSSION

On appeal, Crawford principally argues that the district court erred in ruling that she lacked standing to pursue her present claims and in denying her Rule 60(b) motion for reconsideration of that ruling. She also contends that the court erred in 482*482 denying her motion for partial summary judgment, arguing (1) that, under the sham-affidavit rule, the court could not properly consider the Koller and Decarolis declarations, and (2) that it should have drawn adverse inferences against Defendants as sanctions for their conduct during discovery.

Crawford’s arguments for partial summary judgment in her favor do not require extended discussion. As to the denial of her request that the district court draw factual inferences adverse to Defendants as discovery sanctions, we see no abuse of discretion, see, e.g., Lore v. City of Syracuse, 670 F.3d 127, 174-75 (2d Cir. 2012), and we affirm that denial substantially for the reasons stated by the court in Crawford I, 2011 WL 1118584, at *7-*9. As to Crawford’s contention that the district court’s consideration of the Koller and Decarolis declarations violated the sham-affidavit rule, we reject that contention because that rule has no application here. The principle is that “a party may not create an issue of fact by submitting an affidavit in opposition to a summary judgment motion that, by omission or addition, contradicts the affiant’s previous deposition testimony.” Hayes v. New York City Department of Corrections, 84 F.3d 614, 619 (2d Cir.1996). However, “where … testimony is contradicted by evidence other than the deponent’s subsequent affidavit,… the concern that the proffered issue of fact is a mere `sham’ is alleviated.” Palazzo ex rel. Delmage v. Corio, 232 F.3d 38, 43-44 (2d Cir.2000). In this case there are two flaws in Crawford’s argument. First, the deposition testimony on which Crawford relies was not given by Koller or Decarolis; neither Koller nor Decarolis was deposed; and there is no indication in the record that either of them made any prior sworn statement which his declaration contradicts. Second, the statements in the Koller and Decarolis declarations do not contradict statements made by the defense witnesses who were deposed: Those witnesses testified simply that they had no knowledge of the Crawford negotiations. There is no basis in the record for rejecting that testimony. It is undisputed that all of Koller’s conversations with Crawford were by telephone and that no one other than Crawford and Decarolis was in Decarolis’s car when Crawford was presented with documents for her signature. Disclaimers of knowledge by persons who were not present for these conversations are not contradicted by descriptions of what occurred by persons who were present and do have knowledge. The district court properly considered the Koller and Decarolis declarations in ruling on — and in denying, see Part II.C. below — Crawford’s motion for partial summary judgment in her favor.

As discussed in Parts II.A. and B. below, we find greater merit in Crawford’s challenges to the district court’s rulings that she lacked standing to pursue, or was estopped from pursuing, the present action. Nonetheless, we are entitled to affirm the judgment on any basis that is supported by the record, see, e.g., Mauro v. Southern New England Telecommunications, Inc., 208 F.3d 384, 387 n. 2 (2d Cir.2000), and Defendants argue that the dismissal of Crawford’s claims may be affirmed in whole or in part on other grounds appearing in the record, including statutes of limitations and the absence of evidence to support essential elements of various of her claims. While we reject some of these grounds, such as statute-of-limitations defenses that were not asserted in their answer to the Complaint, see, e.g., Davis v. Bryan, 810 F.2d 42, 44 (2d Cir. 1987), we find merit, as discussed in Part II.C. below, in the arguments that Defendants were entitled to summary judgment 483*483 dismissing Crawford’s claims other than her TILA and common-law fraud claims.

A. Standing

In granting Defendants’ motions to dismiss Crawford’s claims for lack of standing, the district court began as follows:

The act of filing a bankruptcy petition transfers a debtor’s assets to the bankruptcy estate, and these assets remain assets of the bankruptcy estate unless returned to the debtor by the operation of law. Plaintiff unquestionably failed to assert any of these claims in her 2006 bankruptcy, but now contends that she nonetheless has standing to assert her claims [1] because the 2006 bankruptcy was dismissed, rather than discharged, and [2] because Defendants defended similar claims on the merits in the adversary proceeding in Crawford’s 2007 bankruptcy filing.

Crawford I, 2011 WL 1118584, at *13. The court rejected both contentions. In ruling that Crawford’s claims had not revested in her when her 2006 bankruptcy proceeding was dismissed, the court relied principally on Kunica v. St. Jean Financial, Inc., 233 B.R. 46 (S.D.N.Y. 1999) (“Kunica”), and its “concern[] with `protect[ing] creditors from a debtor who may try to hide assets,'” Crawford I, 2011 WL 1118584, at *14 (quoting Kunica, 233 B.R. at 54). The district court noted that

[i]t is “[a] basic tenet of bankruptcy law… that all assets of the debtor, including all pre-petition causes of action belonging to the debtor, are assets of the bankruptcy estate that must be scheduled for the benefit of creditors,”

Crawford I, 2011 WL 1118584, at *13 (quoting Kunica, 233 B.R. at 52), and it stated that

“[c]ourts have held that because an unscheduled claim remains the property of the bankruptcy estate, the debtor lacks standing to bring such claims after emerging from bankruptcy, and the claims must be dismissed,”

Crawford I, 2011 WL 1118584, at *13 (quoting Kunica, 233 B.R. at 53). The court added that “the fact that Defendants contested these claims in the 2007 adversary proceeding cannot confer standing on Plaintiff because … unscheduled assets can only re-vest in the debtor by the operation of law.” Crawford I, 2011 WL 1118584, at *14.

Crawford argued that the dismissal of her 2006 Petition had itself revested her claims in her, citing Central Jersey Freightliner, Inc. v. Freightliner Corp., 987 F.Supp. 289 (D.N.J.1997), which stated that “[w]hile a plan fixes parties’ rights and obligations, dismissal of a bankruptcy case essentially restores the parties to the position they assumed prepetition. See Bankruptcy Code § 349 (addressing effect of dismissal),” 987 F.Supp. at 294.

The district court rejected Crawford’s argument. It noted that the New Jersey district court had adopted a “plain reading” of § 349, Crawford I, 2011 WL 1118584, at *13; but it also noted that the equities in that case favored the debtor, which had voluntarily dismissed its bankruptcy case, see id. The court here found that the equities did not favor Crawford, who had taken advantage of the automatic stay provision, see 11 U.S.C. § 362(a), to impede a foreclosure sale and whose 2006 Petition was then ordered dismissed by the bankruptcy court for unreasonable delay that was prejudicial to creditors. See Crawford I, 2011 WL 1118584, at *13-*14. The district court concluded that “because Plaintiff failed to assert any of the claims in this action in her 2006 bankruptcy petition…, she lacks standing to assert these claims.” Id. at *14. For the reasons that follow, we disagree.

484*484 It is a given, of course, that under provisions generally applicable to all bankruptcy cases, the commencement of the proceeding creates a bankruptcy estate. See 11 U.S.C. § 541(a) (“The commencement of a case under section 301, 302, or 303 of this title creates an estate.” (emphases added)); id. § 301 (providing for voluntary filings). “Such estate” encompasses, inter alia, with few exceptions, “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1) (emphasis added); see, e.g., Adelphia Recovery Trust v. Goldman, Sachs & Co., 748 F.3d 110, 115 (2d Cir.2014) (“Adelphia”); Weber v. SEFCU, 719 F.3d 72, 75 (2d Cir.2013); Chartschlaa v. Nationwide Mutual Insurance Co., 538 F.3d 116, 122 (2d Cir.2008) (“Chartschlaa”), cert. denied, 555 U.S. 1213, 129 S.Ct. 1534, 173 L.Ed.2d 658 (2009). And it is established that such interests include causes of action possessed by the debtor at the time of filing. See, e.g., Jackson v. Novak, 593 F.3d 171, 176 (2d Cir.2010); Olick v. Parker & Parsley Petroleum Co., 145 F.3d 513, 515 (2d Cir.1998); Seward v. Devine, 888 F.2d 957, 963 (2d Cir.1989).

We conclude that Crawford has standing to pursue her present claims because her 2006 Petition was dismissed. Although the district court stated that Crawford lacked standing because “unscheduled assets can only re-vest in the debtor by the operation of law,” Crawford I, 2011 WL 1118584, at *14, we are persuaded that, because Crawford’s 2006 bankruptcy proceeding was dismissed, all of Crawford’s assets were indeed revested in her by operation of law. Section 349 of the Code provides, with an exception not relevant here, that unless the bankruptcy court for cause orders otherwise, “a dismissal of a case … revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case,” 11 U.S.C. § 349(b)(3) (emphases added). Thus, if the debtor owned the property prior to the commencement of the bankruptcy case, a dismissal returns that property to the debtor.

The district court viewed § 349 as overridden by § 554 of the Code, titled “Abandonment of property of the estate.” That section provides that after “notice and a hearing,” the trustee may “abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.” 11 U.S.C. § 554(a) (without court order); id. § 554(b) (by court order). Subsection (c) of § 554 provides further that, unless the court orders otherwise, “any property scheduled under section 521(a)(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title,” id. § 554(c) (emphases added); and subsection (d), on which the district court relied, provides that “property of the estate that is not abandoned under this section and that is not administered in the case remains property of the estate,” id. § 554(d) (emphases added).

We cannot view § 554(d) as overriding § 349. As noted above, § 541(a)(1) provides that the debtor’s assets become property of the estate “as of the commencement” of the bankruptcy case; this applies whether or not the assets are listed in the required § 521(a)(1) schedule — a schedule that can be filed after the commencement of the case, see Fed. R. Bankr.P. 1007(c). The provision in § 349 for the revesting of assets is similarly broad: It makes no distinction between those that were listed in the debtor’s schedule of assets and those that were not; what is revested in the immediately-pre-petition 485*485 owner or owners is “the property of the estate.” 11 U.S.C. § 349(b)(3). The legislative history makes clear that Congress intended that a dismissal would undo the bankruptcy case:

Subsection (b) specifies that the dismissal [inter alia] revests the property of the estate in the entity in which the property was vested at the commencement of the case…. The basic purpose of the subsection is to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case.

H.R.Rep. No. 95-595, at 338 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6294; see A. Resnick & H. Sommer, 8 Collier on Bankruptcy ¶ 1307.09 (16th ed. rev.2013). Since the dismissal undoes the bankruptcy case, there is, upon dismissal, no longer any bankruptcy estate; and hence, there is no longer any property of the estate. See, e.g., SEC v. Great White Marine & Recreation, Inc., 428 F.3d 553, 556 (5th Cir. 2005) (“Without a bankruptcy estate, there can be no property of a bankruptcy estate. See 11 U.S.C. § 349(b)(3) (a dismissal `revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case under this title’).”); Martir Lugo v. de Jesus Saez, 721 F.2d 848, 851 (1st Cir.1983) (“It seems self evident that there is no `estate’ and hence no `property of the estate’ unless there is an existing petition.”).

As there no longer remains any “property of the estate” after a case has been dismissed, § 554 has no applicability after a dismissal. Thus, although subsections (c) and (d) of § 554 prescribe different treatments for assets at the time a bankruptcy case is “closed,” depending on whether they were or were not listed in a § 521(a)(1) schedule, the dismissal of the case under § 349, automatically revesting all of the property of the estate in its prior owners, means that there are no assets remaining to be abandoned or administered.

We are not persuaded to reach the opposite conclusion by the opinion of the district court in Kunica, which dealt with a debtor that, despite the dismissal, received relief that was tantamount to a discharge, and which is, in any event, not binding on us. Nor are we persuaded by Defendants’ reliance on this Court’s decision in Chartschlaa, in which we stated that “undisclosed assets automatically remain property of the estate after the case is closed,” 538 F.3d at 122 (see Defendants’ brief on appeal at 23 and passim). Chartschlaa did not involve a dismissal.

In sum, when Crawford’s First Bankruptcy case was dismissed, the property of the bankruptcy estate revested in her by operation of law. To the extent that the district court declined to apply § 349 on the basis that the equities did not favor Crawford, that rationale bespeaks estoppel rather than lack of standing. We conclude that, by application of § 349, Crawford has standing to pursue her present claims.

B. Estoppel

The district court indeed ruled, as an alternative to its conclusion as to standing, that Crawford “is collaterally estopped from bringing [her present] claims.” Crawford I, 2011 WL 1118584, at *14. The parties agree that the court may have intended a reference to judicial estoppel, rather than collateral estoppel — which applies only to issues that were litigated and actually decided in a prior case. They disagree, of course, as to whether judicial estoppel was applicable. We conclude that it was not.

“Judicial estoppel generally prevents a party from prevailing in one phase 486*486 of a case on an argument and then relying on a contradictory argument to prevail in another phase.” Pegram v. Herdrich, 530 U.S. 211, 227 n. 8, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000). In deciding whether to invoke judicial estoppel, we look principally to see whether “a party’s later position… [is] clearly inconsistent with its earlier position,” and whether the court in the first proceeding adopted the party’s position. New Hampshire v. Maine, 532 U.S. 742, 750-51, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001) (internal quotation marks omitted). “[B]ecause the doctrine is primarily concerned with protecting the judicial process, relief is granted only when the risk of inconsistent results with its impact on judicial integrity is certain.” Adelphia, 748 F.3d at 116 (internal quotation marks omitted).

In Crawford’s 2006 bankruptcy proceeding, her failure to list her present causes of action among her assets was tantamount to a representation that she had no such claims. However, there was no ruling relating to that representation. The court did not confirm Crawford’s proposed plan, address its merits, or mention her assets. It simply dismissed her petition, stating principally that she “ha[d] created unreasonable delay … prejudicial to creditors … [,] ha[d] failed to appear at the confirmation hearing,” and “ha[d] failed to remain current in proposed plan payments to the trustee.” Bankruptcy Court Order dated April 12, 2007. As there was no ruling relating to Crawford’s present claims or to her assets generally, there is no risk of inconsistent adjudications. We conclude that there is no ground for judicial estoppel.

C. Motions for Summary Judgment on Other Grounds

Turning to Defendants’ more common grounds for their motions for summary judgment, we apply the usual principles. The moving party bears the burden of showing the absence of a genuine dispute as to any material fact, see Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); where the nonmoving party will bear the burden of proof on an issue at trial, the moving party may satisfy its burden by “point[ing] to an absence of evidence to support an essential element of the nonmoving party’s” case, Brady v. Town of Colchester, 863 F.2d 205, 210-11 (2d Cir.1988). “[A] complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In considering whether summary judgment is appropriate, a court is required to view the evidence in the light most favorable to the party against whom the motion was made and to draw all reasonable inferences in favor of that party. “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge….” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court “`must disregard all evidence favorable to the moving party that the jury is not required to believe.'” Jasco Tools, Inc. v. Dana Corp., 574 F.3d 129, 152 (2d Cir. 2009) (quoting, with emphasis, Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 151, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000)).

When both sides have moved for summary judgment, the court must apply the above principles to each motion separately. On each motion it must view the evidence in the light most favorable to the party against whom summary judgment is 487*487 sought. Thus, when the district court in the present case considered Crawford’s motion for partial summary judgment in her favor, it properly viewed the declarations of Koller and Decarolis in the light most favorable to Defendants. We see no error in the court’s conclusion that a jury would be entitled to credit their versions of the events. And as the jury would not be required to believe Crawford’s version of the events, the court properly disregarded her version in deciding her motion. Crawford’s motion for partial summary judgment in her favor on the issues of liability was properly denied.

We find merit, however, in Defendants’ contentions that, as to most of the claims asserted in the Complaint, there was at least one element as to which Crawford failed to adduce sufficient evidence of a genuine dispute of material fact to be tried. Our review of the record persuades us that, on this basis, Defendants were entitled to summary judgment dismissing Crawford’s RICO, ECOA, New York General Business Law, and negligent misrepresentation claims. We conclude, however, that there are genuine disputes of material fact for trial with respect to Crawford’s TILA and fraud claims.

1. The RICO Claims

Crawford asserted substantive RICO claims under 18 U.S.C. § 1962(c), along with claims that Defendants conspired to violate that section in violation of 18 U.S.C. § 1962(d). Subsection (c) makes it “unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.” 18 U.S.C. § 1962(c).

To establish a violation of § 1962(c), a plaintiff must show that the defendant conducted, or participated in the conduct, of a RICO enterprise’s affairs through a pattern of racketeering activity. See, e.g., Cruz v. FXDirectDealer, LLC (FXDD), 720 F.3d 115, 120 (2d Cir.2013). To establish a violation of § 1962(d), a plaintiff must show that the defendant agreed with at least one other entity to commit a substantive RICO offense. See, e.g., Baisch v. Gallina, 346 F.3d 366, 376-77 (2d Cir.2003). Defendants contend that Crawford failed to adduce evidence sufficient to establish a number of the elements of these RICO claims. We agree that Crawford failed to point to evidence sufficient to establish either a pattern of racketeering activity or an agreement to engage in a pattern of such activity, and we thus need not reach Defendants’ other RICO arguments.

“`[R]acketeering activity,'” as defined in RICO, may consist of any of a number of criminal offenses, 18 U.S.C. § 1961(1), including mail fraud in violation of 18 U.S.C. § 1341, and wire fraud in violation of 18 U.S.C. § 1343. A “`pattern of racketeering activity'” consists of, inter alia, “at least two acts of racketeering activity,” 18 U.S.C. § 1961(5); and in order to prove such a “pattern,” a civil RICO plaintiff also “must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity,” H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 239, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989) (emphasis in original). The requisite continuity may be found in “either an `open-ended’ pattern of racketeering activity (i.e., past criminal conduct coupled with a threat of future criminal conduct) or a `closed-ended’ pattern of racketeering activity (i.e., past criminal conduct `extending over a substantial period of time’).” GICC 488*488 Capital Corp. v. Technology Finance Group, Inc., 67 F.3d 463, 466 (2d Cir.1995), cert. denied, 518 U.S. 1017, 116 S.Ct. 2547, 135 L.Ed.2d 1067 (1996).

Crawford asserted principally that Defendants engaged in wire fraud, consisting of interstate or international telephone conversations she had with Koller and of Tribeca’s solicitation from her of faxed documents in order to facilitate the allegedly promised bridge loan; she also speculated, without personal knowledge — and hence insufficiently to forestall summary judgment — that, via electronic transmissions, Defendants made monthly reports to consumer credit reporting agencies with regard to her default on her Tribeca loan. Crawford asserted that Defendants engaged in mail fraud, consisting of Franklin’s mailing to her of mortgage statements in January and February 2005 and default notices in March and April 2005, and of sporadic mailings by Tribeca’s counsel in 2005-2010 relating to Tribeca’s state-court foreclosure action. We cannot conclude that the admissible evidence proffered by Crawford suffices to permit a rational inference of either open-ended or closed-ended continuity of racketeering activity.

The mail fraud and wire fraud statutes prohibit a person who “devised or intend[ed] to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises,” from using the mails or interstate or foreign wire facilities “for the purpose of executing such scheme or artifice or attempting so to do.” 18 U.S.C. § 1341 (mail fraud); id. § 1343 (wire fraud). Although the mailed or wired communication need not itself be fraudulent to violate these sections, it must, by the terms of the statutory sections, be made in furtherance of the fraudulent scheme. Where an alleged RICO “enterprise primarily conducts a legitimate business, there must be some evidence from which it may be inferred that the predicate acts” — which must be in furtherance of fraud in order to constitute mail or wire fraud — “were the regular way of operating that business, or that the nature of the predicate acts themselves implies a threat of continued criminal activity.” Cofacrèdit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229, 243 (2d Cir.1999) (“Cofacrèdit”). Mere mailings of monthly statements seeking payment with respect to a single established debt — or communications to the state court in connection with an action on that debt — do not, without more, amount to or suggest a threat of continued criminal activity; the mailings in this case cannot even be viewed as furthering the alleged fraud, for they disclosed to Crawford the existence of the Tribeca Mortgage of which she claims to have been unaware.

Nor did Crawford present any evidence that Tribeca’s allegedly fraudulent statements in Koller’s telephone conversations with her with regard to a loan — or the allegedly fraudulent execution of the Tribeca mortgage to Crawford — evinced a threat of future fraudulent mortgage business practices or was characteristic of Defendants’ normal practice. Although Tribeca, before discontinuing its lending operations in 2007, made some 250 loans a year, Crawford presented no evidence of any other loan that was allegedly procured through any manner of fraud.

Crawford argues that “[t]he existence of only one victim and one scheme suffices for a `pattern’ where there are repeated economic injuries” (Crawford reply brief on appeal at 25), relying principally on Uniroyal Goodrich Tire Co. v. Mutual Trading Corp., 63 F.3d 516 (7th Cir.1995). But that case, while involving only a single victim, involved fraudulent acts that were numerous, varied, and disparate, 489*489 see id. at 519-20, in contrast to the alleged fraud here, which was to sign Crawford up for a $504,000 mortgage. Thus, while the Seventh Circuit in that case found that such numerous and varied fraudulent acts sufficed to show a pattern of racketeering activity against that lone victim, that court has reasoned that “multiple acts of mail fraud in furtherance of a single episode of fraud involving one victim and relating to one basic transaction cannot constitute the necessary pattern,” Tellis v. United States Fidelity & Guaranty Co., 826 F.2d 477, 478 (7th Cir.1986); see also Slaney v. The International Amateur Athletic Federation, 244 F.3d 580, 599 (7th Cir.), cert. denied, 534 U.S. 828, 122 S.Ct. 69, 151 L.Ed.2d 35 (2001). Given the routine use of mail and wire communications in business operations, we agree with that view, as well as with the view of the First Circuit that “RICO claims premised on mail or wire fraud must be particularly scrutinized because of the relative case with which a plaintiff may mold a RICO pattern from allegations that, upon closer scrutiny, do not support it.” Efron v. Embassy Suites (Puerto Rico), Inc., 223 F.3d 12, 20 (1st Cir.2000), cert. denied, 532 U.S. 905, 121 S.Ct. 1228, 149 L.Ed.2d 138 (2001).

We conclude that Crawford’s evidence was insufficient to show the necessary pattern and that Defendants were entitled to summary judgment dismissing her claims under § 1962(c).

In addition, we conclude that Defendants were entitled to summary judgment dismissing her § 1962(d) RICO conspiracy claims. “`A conspirator must intend to further an endeavor which, if completed, would satisfy all of the elements of a substantive criminal offense….'” Cofacrèdit, 187 F.3d at 245 (quoting Salinas v. United States, 522 U.S. 52, 65, 118 S.Ct. 469, 139 L.Ed.2d 352 (1997)). Crawford presented no evidence of any agreement by Defendants to engage in conduct of the type that would be sufficient to constitute a pattern of racketeering activity.

2. The ECOA Claims

ECOA provides that it is “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction[,] … on the basis of race, color, religion, national origin, sex or marital status, or age.” 15 U.S.C. § 1691(a). Defendants contend that summary judgment dismissing the ECOA claims should be affirmed because Crawford failed to adduce evidence that she was discriminated against on account of a protected characteristic. We agree.

Crawford argues that Defendants “[m]isconstrue” her ECOA claims and states, citing 15 U.S.C. § 1691(d)(2) (“[e]ach applicant against whom adverse action is taken [is] entitled to a statement of reasons for such action from the creditor”), that her ECOA claims were “based on Defendants’ failure to give the mandated adverse action notice, since Defendants extended credit different from what Ms. Crawford sought.” (Crawford reply brief on appeal at 23.) However, this argument does not describe the ECOA claims that were asserted in Crawford’s Complaint, which alleged only discriminatory action (see Complaint ¶¶ 82-86).

Crawford does not challenge Defendants’ assertion that she failed to produce evidence of discrimination. In her opposition to Defendants’ summary judgment motions, the only references to discrimination were her assertion that Koller had advised her that Community would foreclose very quickly because she is African-American, and a conclusory reference to “Defendants’ discriminatory actions” (e.g., Crawford Decl. ¶ 14). In her deposition, 490*490 Crawford merely testified, “they discriminated against me because I was African American by giving me a larger than average loan and taking my money and not disclosing what they were doing.” (Deposition of Linda Crawford, April 17, 2009, at 94.) These conclusory assertions were insufficient to create a genuine issue to be tried as to the discrimination element of Crawford’s ECOA claims.

3. The New York General Business Law Claims

The New York General Business Law makes it unlawful to engage in “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in [New York] state….” N.Y. Gen. Bus. Law § 349(a). To state a claim under GBL § 349, a plaintiff “must prove three elements: first, that the challenged act or practice was consumer-oriented; second, that it was misleading in a material way; and third, that the plaintiff suffered injury as a result of the deceptive act.” Stutman v. Chemical Bank, 95 N.Y.2d 24, 29, 709 N.Y.S.2d 892, 895, 731 N.E.2d 608 (2000). To show that the challenged act or practice was consumer-oriented, a plaintiff must show that it had “a broader impact on consumers at large”: “Private contract disputes, unique to the parties, for example, would not fall within the ambit of the statute….” Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 25, 623 N.Y.S.2d 529, 532, 647 N.E.2d 741 (1995).

Crawford presented no evidence that the acts of which she complained, e.g., Defendants’ alleged “obtaining [of] signatures under false pretenses,” “creati[on of] mortgages through forgery,” and “imposi[tion of] exorbitant `closing costs’ without ever informing consumers of the same” (Crawford reply brief on appeal at 32), were acts committed against consumers in general or indeed against anyone other than Crawford. Summary judgment dismissing these claims is appropriate.

4. The Negligent Misrepresentation Claims

To prevail on a claim of negligent misrepresentation under New York law, a plaintiff must show “(1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information.” J.A.O. Acquisition Corp. v. Stavitsky, 8 N.Y.3d 144, 148, 831 N.Y.S.2d 364, 366, 863 N.E.2d 585 (2007). “[L]iability in the commercial context is `imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified.'” Eternity Global Master Fund Limited v. Morgan Guaranty Trust Co. of New York, 375 F.3d 168, 187 (2d Cir.2004) (quoting Kimmell v. Schaefer, 89 N.Y.2d 257, 263, 652 N.Y.S.2d 715, 719, 675 N.E.2d 450 (1996)).

Crawford’s only attempt to show the requisite special relationship between herself and Defendants consists of her argument that “Defendants claimed special expertise in bridge loans to forestall foreclosures” (Crawford reply brief on appeal at 32). That argument is foreclosed by the New York Court of Appeals decision in Greenberg, Trager & Herbst, LLP v. HSBC Bank USA, 17 N.Y.3d 565, 934 N.Y.S.2d 43, 958 N.E.2d 77 (2011), which held that “an arm’s length borrower-lender relationship … does not support a cause of action for negligent misrepresentation,” id. at 578, 934 N.Y.S.2d at 50, 958 N.E.2d 77 (internal quotation marks omitted).

491*491 5. The TILA Claims

TILA is designed “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.” 15 U.S.C. § 1601(a). Together with its implementing Regulation Z, and under specified circumstances, TILA requires disclosure by the “creditor” of, inter alia, the “`amount financed,'” id. § 1638(a)(2)(A), the “`finance charge,'” id. § 1638(a)(3), and the “number, amount, and due dates or period of payments scheduled to repay the total of payments,” id. § 1638(a)(6), as well as rescission rights, see id. § 1635; 12 C.F.R. § 226.23(b)(1). “The term `creditor’ refers only to a person who both (1) regularly extends … consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness….” 15 U.S.C. § 1602(g). We reject Defendants’ contention that Crawford failed to adduce sufficient evidence on the “creditor” and “disclosure” elements of her TILA claims.

Defendants argue on appeal that only Tribeca is a creditor within the meaning of TILA. Although the Tribeca Mortgage and note in the record name only Tribeca as Crawford’s “Lender,” both Franklin and Tribeca admitted in ¶ 65 of their answer to the Complaint that they are creditors within the meaning of TILA, and thus subject to its requirements. “Facts admitted in an answer, as in any pleading, are judicial admissions that bind the defendant throughout th[e] litigation.” Gibbs ex rel. Estate of Gibbs v. CIGNA Corp., 440 F.3d 571, 578 (2d Cir.2006).

As to whether Defendants failed to make the disclosures required by TILA, Crawford testified in her deposition that in the course of her transaction with Defendants, she received no documents to keep and that signatures on TILA disclosure statements Defendants had on file were not hers. Defendants’ proffer of, inter alia, the Decarolis Declaration, indicating that he likely followed his usual practice of providing loan applicants with copies of the requisite papers at closings, did not entitle Defendants to summary judgment dismissing the TILA claims. While that declaration provided evidence that the court was required to accept in addressing Crawford’s motion for summary judgment in her favor, the court was instead required to credit Crawford’s sworn version of the events, and to disregard Defendants’ evidence that a jury would not be required to believe, when it ruled on Defendants’ own motions for summary judgment.

The record thus reveals that there are factual issues to be tried with respect to Crawford’s TILA claims.

6. The Fraud Claims

To prove a claim of fraud under New York law a plaintiff must show, by clear and convincing evidence, see Gaidon v. Guardian Life Insurance Co. of America, 94 N.Y.2d 330, 349-50, 704 N.Y.S.2d 177, 186, 725 N.E.2d 598 (1999), that the defendant made a material misrepresentation of fact, knowing of its falsity and with the intent to induce reliance, and that the plaintiff justifiably relied on that misrepresentation to her detriment, see Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 150, 910 N.E.2d 976 (2009). Defendants argue principally that Crawford failed to adduce evidence that she relied on Defendants’ 492*492 alleged misrepresentations to her detriment. We disagree.

Although Defendants argue that Crawford could not have relied on the alleged misrepresentations as to the terms of the loan because she “alleges that she did not know that she was entering into a loan at all” (Defendants’ brief on appeal at 52 (citing Complaint ¶ 24)), this argument mischaracterizes her claims. Paragraph 24 of the Complaint alleges not that Crawford was unaware that she was entering into a loan agreement, but rather that she was unaware that the loan would be secured by a mortgage on her home. Crawford’s sworn descriptions of her conversations with Koller provide evidence, inter alia, (a) that she was led to believe she was being offered a “bridge loan” of $35,000 without a mortgage, to stave off foreclosure on existing mortgages totaling some $400,000, (b) that in reliance on Koller’s representations that Franklin and Tribeca needed “specimen signatures” from her to proceed with the bridge loan, she provided such signatures, and (c) that, without her consent, those signatures were instead used to bind her to a $504,000 mortgage from Tribeca. Crawford adduced sufficient evidence of reliance.

Although Defendants argue that any dispute as to whether there was reliance does not concern an element that is material, on the basis that Crawford failed to adduce sufficient evidence to support certain other elements of her fraud claims, we reject that argument as unsupported by the record. For example, Defendants argue that Franklin could not be held liable because there was “no evidence that Franklin had anything to do with the alleged conduct that forms the basis for Plaintiff’s claims” (Defendants’ brief on appeal at 53). But Crawford presented evidence that Franklin and Tribeca shared a single hiring department, that Koller’s supervisor reported to Franklin’s chief executive officer, that a Franklin vice president was involved in her loan transaction, and that a Franklin document referred to her loan as a “Franklin Credit Loan.” Such evidence is sufficient to create a genuine issue as to Franklin’s participation. Defendants also argue that because Crawford managed to stave off foreclosure on the Tribeca Mortgage for several years while making no mortgage payments, the allegedly fraudulent Tribeca Mortgage caused her no injury. We cannot accept this argument as a matter of law. Crawford was charged more than $35,000 in settlement fees in the mortgage transaction, and she eventually lost her home in foreclosure. Whether she suffered injury is a question to be answered by a factfinder.

In sum, whether to credit Crawford’s testimony is a matter for the finder of fact at trial, not for a court in considering summary judgment. We conclude that, with respect to her fraud claims, Crawford’s sworn statements as to the representations made and as to her reliance on them to her detriment, taken as true for purposes of the motions for summary judgment against her, presented genuine issues of fact to be tried.

CONCLUSION

We have considered all of the parties’ contentions in support of their respective positions on this appeal and, except to the extent indicated above, have found them to be without merit. For the reasons stated, we affirm so much of the judgment as (1) denied Crawford’s motion for partial summary judgment in her favor and (2) granted Defendants’ motions for summary judgment dismissing her claims under RICO, ECOA, and New York General Business Law § 349, and for negligent misrepresentation. We vacate so much of the judgment as dismissed Crawford’s claims for 493*493 violation of TILA and for common-law fraud, and we remand for further proceedings on those claims.

No costs.

[*] The Clerk of Court is directed to amend the official caption to conform with the above.

Failure to Identify Enterprise and common purpose leads to dismissal in claimed mortgage fraud

Plaintiff included a RICO claim in a complaint alleging mortgage fraud. Utilizing Twombley which requires that the plaintiff establish his claim at the pleadings stage, the defendant successfully moved to dismiss the complaint. Here, the Court found the plaintiff failed to demonstrate a RICO enterprise in the alleged scheme.

“Hopkins’ complaint fails to identify a RICO enterprise. “[T]o establish liability under § 1962(c) one must allege and prove the existence of two distinct entities: (1) a `person’; and (2) an `enterprise’ that is not simply the same `person’ referred to by a different name.” Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161, (2001); Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005). A “person” is defined as “any individual or entity capable of holding a legal or beneficial interest in property.” 18 U.S.C. § 1961(3). As AHMSI and Citibank are recognized legal entities, they are “persons” within the meaning of RICO. An “enterprise” is defined to include “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” § 1961(4). Hopkins has not alleged the existence of a separate legal entity apart from the defendants; rather his complaint relies on an association-in-fact between the individual defendants. See Bias v. Wells Fargo & Co., 942 F. Supp. 2d 915, 940 (N.D. Cal. 2013) (“An enterprise that is not a legal entity is commonly known as an `association-in-fact’ enterprise.”).”

Full Opinion, Hopkins v. American Home Mortgage Services, (N.D. Cal. 2014).

DONALD RAY HOPKINS, Plaintiffs,
v.
AMERICAN HOME MORTGAGE SERVICING, INC. et al., Defendants.

No. 13-4447 RS.

United States District Court, N.D. California, San Francisco Division.

February 13, 2014.

ORDER GRANTING IN PART DEFENDANTS’ MOTIONS TO DISMISS AND ORDERING PLAINTIFF TO SHOW CAUSE

RICHARD SEEBORG, District Judge.

I. INTRODUCTION

This action was removed to federal court following years of litigation before the Alameda County Superior Court. Several motions are now pending: defendant Citibank’s motions to dismiss and to strike portions of plaintiff’s fourth amended complaint (FAC) and defendant American Home Mortgage Servicing, Inc.’s motion to dismiss the FAC. For the following reasons, defendants’ motions to dismiss are granted in part with respect to plaintiff’s federal claims. In particular, the eighteenth claim for relief (under RICO) is dismissed with leave to amend and the eighth claim (under RESPA) is dismissed with prejudice and without leave to amend. In addition, plaintiff is ordered to show cause why his remaining federal claim against defendant ABC should not be dismissed. If plaintiff wishes to remain in federal court, he must file an amended complaint and respond to this order within thirty (30) days.[1]

II. BACKGROUND

Plaintiff Donald Ray Hopkins contends that defendants Citibank, Homeward Residential Inc. (Homeward) f/k/a American Home Mortgages Servicing Inc. (AHMSI),[2] and American Home Mortgage Corp. d/b/a American Brokers Conduit (ABC) conspired to foreclose upon his home in Oakland, California. According to Hopkins, AHMSI and ABC secretly instructed his bank, Citibank, to cancel several timely electronic mortgage payments. Hopkins avers that defendants blamed him for the resulting nonpayment, thereby creating a pretext for the subsequent non-judicial foreclosure of his home, which they allegedly sold at a significant profit.

Hopkins filed this action in the Alameda County Superior Court in June 2011. Some two years and four amended complaints later, Hopkins for the first time alleged several federal claims for relief in August 2013. Defendants removed, contending this court has original jurisdiction over Hopkins’ federal claims and supplemental jurisdiction over his state law claims. Shortly thereafter, Citigroup filed motions to strike and to dismiss the FAC, with AHMSI bringing its own motion to dismiss. More than two weeks after the opposition deadlines passed for all three aforementioned motions, Hopkins moved to stay these proceedings, because defendant ABC, the purported originator and holder of the mortgage at issue, had filed for bankruptcy protection. (ECF No. 29; ECF No. 35).

A previous order denied Hopkins’ motion to stay and ordered him to file responses to defendants’ motions by December 17, 2013. (ECF No. 38). Hopkins filed separate oppositions to Citibank’s and AHMSI’s motions to dismiss, but did not oppose Citibank’s motion to strike.[3] (ECF No. 39; ECF No. 40). Hopkins argues that all of his claims are properly pleaded or, in the alternative, that leave to amend is warranted. Citibank and AHMSI filed replies requesting Hopkins’ claims be dismissed with prejudice. The motions were submitted without oral argument pursuant to Civil Local Rule 7-1(b).

III. LEGAL STANDARD

A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). While “detailed factual allegations are not required,” a complaint must have sufficient factual allegations to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 566 U.S. 652, 678 (2009) (citing Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This standard asks for “more than a sheer possibility that a defendant acted unlawfully.” Id. The determination is a context-specific task requiring the court “to draw in its judicial experience and common sense.” Id. at 1950.

A motion to dismiss a complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Dismissal under Rule 12(b)(6) may be based on either the “lack of a cognizable legal theory” or on “the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). When evaluating such a motion, the court must accept all material allegations in the complaint as true, even if doubtful, and construe them in the light most favorable to the non-moving party. Twombly, 550 U.S. at 570. “[C]onclusory allegations of law and unwarranted inferences,” however, “are insufficient to defeat a motion to dismiss for failure to state a claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996); see also Twombly, 550 U.S. at 555 (“threadbare recitals of the elements of the claim for relief, supported by mere conclusory statements,” are not taken as true).

IV. DISCUSSION

A. Eighth Claim for Relief for Violating the Real Estate Settlement Procedures Act (RESPA)

Under RESPA, “[e]ach transferee servicer to whom the servicing of any federally related mortgage loan is assigned, sold, or transferred shall notify the borrower of any such assignment, sale, or transfer.” 12 U.S.C § 2605(c)(1) (2012). RESPA also requires loan servicers to respond to Qualified Written Requests (QWR) submitted by borrowers. § 2605(e). Hopkins alleges AHMSI violated RESPA, because AHMSI failed to provide (1) notice when it began servicing the loan, (2) notice when AHMSI filed for bankruptcy, (3) copies of the operative loan documents, and (4) a response to Hopkins’ March 30, 2012 QWR. (FAC, Exb. A at ¶¶ 22, 69-70). As an initial matter, it is not clear that RESPA requires loan servicers to provide borrowers with notice of bankruptcy proceedings or copies of loan documents. Hopkins does not invoke a single piece of legal authority to support his contrary contention.

More importantly, Hopkins fails to allege any pecuniary loss attributable to the RESPA violations. This defect is fatal to his RESPA claims. RESPA provides that anyone who fails to comply with its provisions shall be liable to the borrower for “any actual damages to the borrower as a result of the failure[.]” 12 U.S.C. § 2605(f). “Although this section does not explicitly set this out as a pleading standard, a number of courts have read the statute as requiring a showing of pecuniary damage in order to state a claim.” Allen v. United Financial Mortg. Corp., 660 F. Supp. 2d 1089, 1097 (N.D. Cal 2009). To advance a RESPA claim, a “[p]laintiff must, at a minimum, also allege that the breach resulted in actual damages.” Id. (citing Hutchinson v. Delaware Sav. Bank FSB, 410 F. Supp. 2d 374, 383 (D.N.J. 2006)). “This pleading requirement has the effect of limiting the cause of action to circumstances in which plaintiffs can show that a failure of notice has caused them actual harm.” Id. at 1097. Courts, however, “have interpreted this requirement [to plead pecuniary damage] liberally.” Yulaeva v. Greenpoint Mortgage Funding, Inc., CIVS-09-1504 LKK/KJM, 2009 WL 2880393, at *15 (E.D. Cal. Sept. 3, 2009). For example, in Hutchinson, plaintiffs pled sufficient pecuniary loss by claiming they suffered negative credit ratings when the servicer submitted delinquency notices to credit bureaus after receiving a QWR. 410 F. Supp. 2d at 383.

Here, Hopkins offers only conclusory allegations that he is entitled to damages and attorney fees under RESPA. (See FAC at ¶ 72). Hopkins fails to explain how the alleged RESPA violations caused him any pecuniary loss. See Shepherd v. Am. Home Mortgage Servs., Inc., CIV 209-1916 WBS GGH, 2009 WL 4505925 (E.D. Cal. Nov. 20, 2009) (concluding plaintiff’s allegation he “suffered and continue[d] to suffer damages and costs of suit” was insufficient even under “a liberal pleading standard for harm”). The specific harms plaintiff complains of—the converted loan payments, improper late fees, and non-judicial foreclosure—allegedly resulted from defendants conspiring to cancel Hopkins’ electronic checks and Hopkins ceasing his loan payments. These injuries do not flow from AHMSI’s alleged RESPA violations. Indeed, the complaint suggests that Hopkins was aware during the relevant time period that AHMSI serviced his loan, as he made loan payments to AHMSI since at least July 2008. (See Customer Account Activity Statement, FAC, Exb. 3). Moreover, Hopkins’ QWR was not submitted until March 2012, a year after Hopkins admittedly stopped paying his loans. See Allen, 660 F. Supp. 2d at 1097 (stating plaintiff’s “loss of property appears to have been caused by his default”). Because it does not appear that Hopkins can cure this deficiency with additional good faith pleading, Hopkins’ eighth claim for relief is dismissed with prejudice.

B. Eighteenth Claim for Relief for Violating the Racketeer Influenced and Corrupt Organizations Act (RICO)

To state a RICO claim, a plaintiff must allege that defendant (a) received income derived from a pattern of racketeering activity, and used the income to acquire or invest in an enterprise; (b) acquired an interest in, or control of, an enterprise through a pattern of racketeering activity; (c) conducted or participated in the conduct of an enterprise through a pattern of racketeering activity; or (d) conspired to engage in any of these activities. See 18 U.S.C. § 1962(a)-(d). Although Hopkins’ complaint does not specify which RICO subsection(s) defendants allegedly violated, his allegations most closely fit § 1962(c) and are analyzed accordingly.[4] See Reynolds v. E. Dyer Dev. Co., 882 F.2d 1249, 1251 (7th Cir. 1989) (stating “[I]t is essential to plead precisely . . . the RICO section allegedly violated[,]” but affirming district court decision to analyze under § 1962(c)). Under § 1962(c), a plaintiff must allege: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as `predicate acts’) (5) causing injury to plaintiff’s business or property.” Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir.1996) (citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)).

“[R]acketeering activity” is any act indictable under several provisions of Title 18 of the United States Code, and includes the predicate acts of mail fraud and wire fraud, each of which is alleged in this case.[5] Turner v. Cook, 362 F.3d 1219, 1229 (9th Cir. 2004) (citing 18 U.S.C. § 1961(1)). Claims for mail and wire fraud are subject to Rule 9(b)’s heightened pleading requirements. Sanford v. MemberWorks, Inc., 625 F.3d 550, 557-58 (9th Cir. 2010); Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 (9th Cir. 1991) (“[Rule 9(b)] requires a pleader of fraud to detail with particularity the time, place, and manner of each act of fraud, plus the role of each defendant in each scheme.”).

Hopkins alleges that defendants used mail and wires to disseminate false and misleading information with intent to cause him to miss payments, incur late fees, and default on his home loan.[6] (FAC at ¶¶ 130-145). Specifically, Hopkins avers he directed Citibank to make timely electronic loan payments to AHMSI from July 2010 to October 2010, but AHMSI instructed Citibank to cancel these payments.[7] (Id. at ¶ 1). Hopkins further avers that Citibank and AHMSI either applied these payments to his loan late or converted the funds into secret accounts.[8] (Id. at ¶¶ 1-3). Hopkins’ RICO claim suffers from several deficiencies, which are addressed in turn.

1. RICO Enterprise

Hopkins’ complaint fails to identify a RICO enterprise. “[T]o establish liability under § 1962(c) one must allege and prove the existence of two distinct entities: (1) a `person’; and (2) an `enterprise’ that is not simply the same `person’ referred to by a different name.” Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161, (2001); Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005). A “person” is defined as “any individual or entity capable of holding a legal or beneficial interest in property.” 18 U.S.C. § 1961(3). As AHMSI and Citibank are recognized legal entities, they are “persons” within the meaning of RICO. An “enterprise” is defined to include “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” § 1961(4). Hopkins has not alleged the existence of a separate legal entity apart from the defendants; rather his complaint relies on an association-in-fact between the individual defendants. See Bias v. Wells Fargo & Co., 942 F. Supp. 2d 915, 940 (N.D. Cal. 2013) (“An enterprise that is not a legal entity is commonly known as an `association-in-fact’ enterprise.”).

The Supreme Court in United States v. Turkette stated that an association-in-fact enterprise is “a group of persons associated together for a common purpose of engaging in a course of conduct.” 452 U.S. 576, 583 (1981). Ninth Circuit precedent requires proof of three elements: (i) a common purpose of engaging in a course of conduct; (ii) evidence of an “ongoing organization, formal or informal”; and (iii) evidence that the various associates function as a continuing unit. Odom v. Microsoft Corp., 486 F.3d 541, 551-52 (9th Cir.2007) (en banc) (quoting Turkette, 452 U.S. at 583).[9] However, an “associated-in-fact enterprise under RICO does not require any particular organizational structure, separate or otherwise.” Id. at 551.[10]

Hopkins alleges that the defendants “associated themselves together for a common purpose” of distributing false information to misdirect or steal his monthly loan payments. (FAC at ¶¶ 130, 133). Hopkins specifically alleges that AHSMI and Citibank secretly canceled his checks, deposited the funds into secret accounts, and continued to issue statements indicating his loans had been properly paid. (FAC at ¶¶ 1-3). These allegations, if true, are sufficient to show defendants’ common purpose of misdirecting or stealing Hopkins’ loan payments. See Izenberg v. ETS Servs., LLC, 589 F. Supp. 2d 1193, 1203 (C.D. Cal. 2008) (finding plaintiffs’ allegations that defendants illegally foreclosed on properties “sufficiently plead that defendants had a common purpose— i.e., to collect and foreclose on mortgages illegally”).

Similarly, Hopkins’ allegations are sufficient to show an ongoing organization. A plaintiff properly pleads an ongoing organization when he alleges the vehicle or mechanism used to commit the predicate acts. Odom, 486 F.3d at 552 (“An ongoing organization is a vehicle for the commission of two or more predicate crimes.”) (quotation omitted). Here, Hopkins’ allegations of the canceled checks, secret accounts, and incorrect statements sufficiently show the vehicle for defendants’ alleged fraudulent acts. See id. (finding allegations that defendants established “mechanisms for transferring plaintiffs’ personal and financial information” and a “cross-marketing contract” sufficiently evinced an ongoing organization); Friedman v. 24 Hour Fitness USA, Inc., 580 F. Supp. 2d 985, 993 (C.D. Cal. 2008) (“Plaintiffs’ description of the mechanisms that Defendant set up with each payment processor satisfies the requirement of a `vehicle for the commission of at least two predicate acts of fraud[.]'”).

Hopkins’ allegations, however, do not pled facts showing the associates of the enterprise— here, AHMSI and Citibank—function as a continuing unit. “[T]he continuity requirement focuses on whether the associates’ behavior was `ongoing’ rather than isolated activity.” Odom, 486 F.3d at 553; Bryant v. Mattel, Inc., 573 F. Supp. 2d 1254, 1263 (C.D. Cal. 2007) (“The `continuing unit’ requirement . . . is related to the notion that RICO was not meant to address discrete instances of fraud or criminal conduct.”). Courts often look to the length of time that the associates have interacted to determine whether they functioned as a continuing unit. See Bryant, 573 F. Supp. 2d at 1263 (“[T]his requirement is related to the duration of the racketeering activities.”); see also Odom, 486 F.3d at 553 (“An almost two-year time span is far more than adequate to establish that Best Buy and Microsoft functioned as a continuing unit.”).

Similar to his failure to establish a pattern of racketeering activity, discussed further below, Hopkins’ allegations do not indicate that the defendants’ alleged behavior is ongoing, rather than isolated. See Turkette, 452 U.S. at 583 (noting “the proof used to establish these separate elements may in particular cases coalesce”). Even if the four cancelled checks were the proximate cause of Hopkins’ non-judicial foreclosure, this alone is not sufficient to indicate that Citibank and AHMSI function as a continuing unit. Cf. Izenberg, 589 F. Supp. 2d at 1203 (finding no continuing unit when plaintiffs’ complaint was focused on a single foreclosure sale); Gamboa v. Tr. Corps, 09-0007 SC, 2009 WL 656285, at *5 (N.D. Cal. Mar. 12, 2009) (same). Accordingly, the complaint fails adequately to identify a RICO enterprise.

2. Pattern of Racketeering Activity

Hopkins also fails to aver facts supporting the existence of a RICO pattern. A RICO claim requires a showing of “a pattern of racketeering activity” which is defined as “at least two acts of racketeering activity” in a ten year period. 18 U.S.C. § 1961(5). “Two acts are necessary, but not sufficient, for finding a violation.” Howard v. Am. Online Inc., 208 F.3d 741, 746 (9th Cir. 2000) (citing H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 238 (1989)). “[T]he term `pattern’ itself requires the showing of a relationship between the predicates and of the threat of continuing activity.” Id.

Hopkins fails to allege a RICO pattern, because he has not pled facts supporting either closed-ended or open-ended continuity. “[T]o satisfy the continuity requirement, [a complainant] must prove either a series of related predicates extending over a substantial period of time, i.e., closed-ended continuity, or past conduct that by its nature projects into the future with a threat of repetition, i.e. open-ended continuity.” Steam Press Holdings, Inc. v. Hawaii Teamsters, Allied Workers Union, Local 996, 302 F.3d 998, 1011 (9th Cir. 2002) (quoting Howard, 208 F.3d at 750) (alteration original). Defendants’ alleged predicate acts occurred over a four-month period and are insufficient to show closed-ended continuity. See Howard, 208 F.3d at 750 (“Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy [the closed-ended continuity] requirement. . . . Activity that lasts only a few months is not sufficiently continuous.”) (alteration original); Liu v. Li, EDCV 10-00952 ODW, 2010 WL 4286265, at *5 (C.D. Cal. Oct. 21, 2010) (finding plaintiffs did not sufficiently allege a “pattern” when the predicate acts of wire and mail fraud spanned from January 10, 2007 to March 12, 2007).

Open-ended continuity is shown by “[p]redicate acts that specifically threaten repetition or that become a `regular way of doing business.'” Id. (quoting Allwaste, Inc. v. Hecht, 65 F.3d 1523, 1528 (9th Cir. 1995)). Hopkins fails to allege facts that plausibly support his theory defendants improperly cancel customer loan payments as part of their regular way of doing business. Hopkins’ conclusory allegation, unsupported by any facts in the record, that “what happened to plaintiff here is standard operating procedure for defendant[s]” is insufficient to meet Rule 9(b)’s heightened pleading requirements.[11] (ECF. No. 39 at 8).

Although it is not apparent how Hopkins can cure the deficiencies in his RICO claim, the policy of granting leave to amend “is to be applied with extreme liberality.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001). “In determining whether leave to amend is appropriate, the district court considers `the presence of any of four factors: bad faith, undue delay, prejudice to the opposing party, and/or futility.'” Id. (quoting Griggs v. Pace Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999)). Although Hopkins’ failure to abide by local rules and comply with a prior court order caused delay in these proceedings, see Order Denying Motion to Stay and Directing Plaintiff to File Responses to Defendants’ Motions to Dismiss and Strike, Dec. 11, 2013 (ECF No. 18), and although it is uncertain if Hopkins can successfully amend his claim, that prospect, at this juncture, cannot be deemed “futile.” See Allen v. City of Beverly Hills, 911 F.2d 367, 374 (9th Cir. 1990). Accordingly, the RICO claim is dismissed with leave to amend.

C. Plaintiff’s Remaining Claims

Hopkins’ only remaining federal claim is the thirteenth claim for relief against ABC for violation of the Truth in Lending Act (TILA). While not raised by the parties, it appears that Hopkins’ TILA claim also suffers from significant deficiencies. In particular, Hopkins’ prayer for relief is premised upon an alleged “continuing right to rescind all loans . . . pursuant to 15 U.S.C. § 1635(a) and Regulation Z 12 C.F.R. § 226.23(a)(3).” (FAC, at ¶ 108). Hopkins’ home loan, however, evidently is a “residential mortgage transaction,” which is specifically exempted from the operation of the aforementioned sections.[12] 15 U.S.C. § 1635(e); 12 C.F.R. § 226.23(f). Moreover, barring exceptions not applicable here, any right of rescission Hopkins held expired under the statute in October 2009. 15 U.S.C. § 1635(f) (“An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor[.]”). Therefore, Hopkins is ordered to show cause why his TILA claim should not also be dismissed. Considering the extent of the state court’s prior involvement in this litigation, if Hopkins is unable to state a federal claim, this action will be remanded to the Alameda County Superior Court.

V. CONCLUSION

For the aforementioned reasons, defendants’ motions to dismiss are GRANTED in part. Hopkins’ RESPA claims are dismissed with prejudice and his RICO claims are dismissed with leave to amend. If plaintiff wishes to amend his complaint, he must refile within thirty (30) days of this order. Hopkins is further ordered to show cause within thirty (30) days why his TILA claim against ABC should not be dismissed. Hopkins’ further filings, if any, must comply with the Federal Rules of Civil Procedure and the Civil Local Rules of the Northern District of California.

IT IS SO ORDERED.

[1] This order does not reach Citibank’s motion to strike. If plaintiff substantiates a basis for federal jurisdiction, Citibank’s motion to strike will be resolved at a later date.

[2] AHMSI is now known as Homeward Residential, Inc. Because most filings refer to Homeward as AHMSI, that acronym will be used here.

[3] Although Hopkins titled his opposition to Citibank’s motions “Plaintiff Donald Ray Hopkins’ Memorandum of Points and Authorities in Opposition to Defendant Citibank’s Motions to Dismiss/Strike Fourth Amended Complaint[,]” he did not offer any substantive opposition to Citibank’s motion to strike. (See ECF No. 40).

[4] Hopkins’ allegations may also fit within § 1962(d). Because Hopkins’ claim under § 1962(d) depends on his § 1962(c) claim, the analysis is restricted to § 1962(c). See Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007).

[5] Hopkins also alleges “unlawful dealings in violation of 18 U.S.C. Sections 1961, 1962 and their sub parts.” (FAC at ¶ 137). The term “unlawful dealings” does not appear in the RICO statute, nor does it identify a cognizable legal theory on which plaintiff could base his claim.

[6] Hopkins suggests in his opposition that defendants’ alleged RESPA violations are relevant to his RICO claim. (ECF No. 39 at 9). RESPA violations, however, are not predicate acts included in the statutory definition and Hopkins offers no authority or explanation why the alleged violations should be considered “racketeering activity.” See 18 U.S.C. § 1961(1). Hopkins also alleges that defendants engaged in predatory loan practices. (FAC at ¶¶ 130-145). Hopkins concedes that neither AHMSI nor Citibank originated his home loan. Further, Hopkins has not alleged facts showing AHMSI’s or Citibank’s involvement, if any, in issuing his loan. Consequently, even if these practices are predicate acts, they do not support Hopkins’ RICO claims against AHMSI and Citibank.

[7] Hopkins complaint is inconsistent as to how many payments AHMSI instructed Citibank to cancel.

[8] AHMSI’s Customer Account Activity Statement, attached to the FAC, indicates that Hopkins’ July 2010 through August 2010 payments were eventually applied to his loan, but that the July 2010 payment incurred a late fee. Hopkins’ October 2010 payment was never applied to the mortgage. (FAC, Exb. 3).

[9] The Ninth Circuit in Odom noted that the definition of an enterprise is “not very demanding.” 486 F.3d at 548; Boyle v. United States, 556 U.S. 938, 944 (2009) (“the very concept of an association in fact is expansive”).

[10] Odom specifically overruled prior holdings requiring the associate-in-fact enterprise to have a sufficiently “ascertainable structure, separate and apart from the structure inherent in the conduct of the pattern of racketeering activity.” See Chang v. Chen, 80 F.3d 1293, 1295 (9th Cir. 1996).

[11] Hopkins argues it is clear that defendant’s alleged conduct is typical, because various state Attorneys General Offices have brought actions against AHMSI and because AHMSI was the subject of CBS 60 Minutes “robo-signing” expose. (ECF No. 39 at 8). This evidence is not in the record before the court and is not considered here.

[12] “The term `residential mortgage transaction’ means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling.” 15 U.S.C. § 1602(x).

Sedima v. Imrex

gavel

Sedima, SP RL v. Imrex Co., 473 U.S. 479 (1985)

SEDIMA, S. P. R. L.
v.
IMREX CO., INC., ET AL.

No. 84-648.

Supreme Court of United States.

Argued April 17, 1985

Decided July 1, 1985
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
Franklyn H. Snitow argued the cause for petitioner. With him on the brief was William H. Pauley III.

Richard Eisenberg argued the cause for respondents. With him on the brief were Alfred Weintraub and Joel I. Klein.

JUSTICE WHITE delivered the opinion of the Court.

The Racketeer Influenced and Corrupt Organizations Act (RICO), Pub. L. 91-452, Title IX, 84 Stat. 941, as amended, 18 U. S. C. §§ 1961-1968, provides a private civil action to recover treble damages for injury “by reason of a violation of” its substantive provisions. 18 U. S. C. § 1964(c). The initial dormancy of this provision and its recent greatly increased utilization[1] are now familiar history.[2] In response to what it perceived to be misuse of civil RICO by private plaintiffs, the court below construed § 1964(c) to permit private actions only against defendants who had been convicted on criminal charges, and only where there had occurred a “racketeering injury.” While we understand the court’s concern over the consequences of an unbridled reading of the statute, we reject both of its holdings.

I

RICO takes aim at “racketeering activity,” which it defines as any act “chargeable” under several generically described state criminal laws, any act “indictable” under numerous specific federal criminal provisions, including mail and wire fraud, and any “offense” involving bankruptcy or securities 482*482 fraud or drug-related activities that is “punishable” under federal law. § 1961(1).[3] Section 1962, entitled “Prohibited Activities,” outlaws the use of income derived from a “pattern of racketeering activity” to acquire an interest in or establish an enterprise engaged in or affecting interstate commerce; the acquisition or maintenance of any interest in an enterprise “through” a pattern of racketeering activity; 483*483 conducting or participating in the conduct of an enterprise through a pattern of racketeering activity; and conspiring to violate any of these provisions.[4]

Congress provided criminal penalties of imprisonment, fines, and forfeiture for violation of these provisions. § 1963. In addition, it set out a far-reaching civil enforcement scheme, § 1964, including the following provision for private suits:

“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 court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee.” § 1964(c).

In 1979, petitioner Sedima, a Belgian corporation, entered into a joint venture with respondent Imrex Co. to provide electronic components to a Belgian firm. The buyer was to order parts through Sedima; Imrex was to obtain the parts 484*484 in this country and ship them to Europe. The agreement called for Sedima and Imrex to split the net proceeds. Imrex filled roughly $8 million in orders placed with it through Sedima. Sedima became convinced, however, that Imrex was presenting inflated bills, cheating Sedima out of a portion of its proceeds by collecting for nonexistent expenses.

In 1982, Sedima filed this action in the Federal District Court for the Eastern District of New York. The complaint set out common-law claims of unjust enrichment, conversion, and breach of contract, fiduciary duty, and a constructive trust. In addition, it asserted RICO claims under § 1964(c) against Imrex and two of its officers. Two counts alleged violations of § 1962(c), based on predicate acts of mail and wire fraud. See 18 U. S. C. §§ 1341, 1343, 1961(1)(B). A third count alleged a conspiracy to violate § 1962(c). Claiming injury of at least $175,000, the amount of the alleged overbilling, Sedima sought treble damages and attorney’s fees.

The District Court held that for an injury to be “by reason of a violation of section 1962,” as required by § 1964(c), it must be somehow different in kind from the direct injury resulting from the predicate acts of racketeering activity. 574 F. Supp. 963 (1983). While not choosing a precise formulation, the District Court held that a complaint must allege a “RICO-type injury,” which was either some sort of distinct “racketeering injury,” or a “competitive injury.” It found “no allegation here of any injury apart from that which would result directly from the alleged predicate acts of mail fraud and wire fraud,” id., at 965, and accordingly dismissed the RICO counts for failure to state a claim.

A divided panel of the Court of Appeals for the Second Circuit affirmed. 741 F. 2d 482 (1984). After a lengthy review of the legislative history, it held that Sedima’s complaint was defective in two ways. First, it failed to allege an injury “by reason of a violation of section 1962.” In the court’s view, 485*485 this language was a limitation on standing, reflecting Congress’ intent to compensate victims of “certain specific kinds of organized criminality,” not to provide additional remedies for already compensable injuries. Id., at 494. Analogizing to the Clayton Act, which had been the model for § 1964(c), the court concluded that just as an antitrust plaintiff must allege an “antitrust injury,” so a RICO plaintiff must allege a “racketeering injury” — an injury “different in kind from that occurring as a result of the predicate acts themselves, or not simply caused by the predicate acts, but also caused by an activity which RICO was designed to deter.” Id., at 496. Sedima had failed to allege such an injury.

The Court of Appeals also found the complaint defective for not alleging that the defendants had already been criminally convicted of the predicate acts of mail and wire fraud, or of a RICO violation. This element of the civil cause of action was inferred from § 1964(c)’s reference to a “violation” of § 1962, the court also observing that its prior-conviction requirement would avoid serious constitutional difficulties, the danger of unfair stigmatization, and problems regarding the standard by which the predicate acts were to be proved.

The decision below was one episode in a recent proliferation of civil RICO litigation within the Second Circuit[5] and 486*486 in other Courts of Appeals.[6] In light of the variety of approaches taken by the lower courts and the importance of the issues, we granted certiorari. 469 U. S. 1157 (1984). We now reverse.

II

As a preliminary matter, it is worth briefly reviewing the legislative history of the private treble-damages action. RICO formed Title IX of the Organized Crime Control Act of 1970, Pub. L. 91-452, 84 Stat. 922. The civil remedies in the bill passed by the Senate, S. 30, were limited to injunctive actions by the United States and became §§ 1964(a), (b), and 487*487 (d). Previous versions of the legislation, however, had provided for a private treble-damages action in exactly the terms ultimately adopted in § 1964(c). See S. 1623, 91st Cong., 1st Sess., § 4(a) (1969); S. 2048 and S. 2049, 90th Cong., 1st Sess. (1967).

During hearings on S. 30 before the House Judiciary Committee, Representative Steiger proposed the addition of a private treble-damages action “similar to the private damage remedy found in the anti-trust laws. . . . [T]hose who have been wronged by organized crime should at least be given access to a legal remedy. In addition, the availability of such a remedy would enhance the effectiveness of title IX’s prohibitions.” Hearings on S. 30, and Related Proposals, before Subcommittee No. 5 of the House Committee on the Judiciary, 91st Cong., 2d Sess., 520 (1970) (hereinafter House Hearings). The American Bar Association also proposed an amendment “based upon the concept of Section 4 of the Clayton Act.” Id., at 543-544, 548, 559; see 116 Cong. Rec. 25190-25191 (1970). See also H. R. 9327, 91st Cong., 1st Sess. (1969) (House counterpart to S. 1623).

Over the dissent of three members, who feared the treble-damages provision would be used for malicious harassment of business competitors, the Committee approved the amendment. H. R. Rep. No. 91-1549, pp. 58, 187 (1970). In summarizing the bill on the House floor, its sponsor described the treble-damages provision as “another example of the antitrust remedy being adapted for use against organized criminality.” 116 Cong. Rec. 35295 (1970). The full House then rejected a proposal to create a complementary treble-damages remedy for those injured by being named as defendants in malicious private suits. Id., at 35342. Representative Steiger also offered an amendment that would have allowed private injunctive actions, fixed a statute of limitations, and clarified venue and process requirements. Id., at 35346; see id., at 35226-35227. The proposal was greeted with some hostility because it had not been reviewed in Committee, 488*488 and Steiger withdrew it without a vote being taken. Id., at 35346-35347. The House then passed the bill, with the treble-damages provision in the form recommended by the Committee. Id., at 35363-35364.

The Senate did not seek a conference and adopted the bill as amended in the House. Id., at 36296. The treble-damages provision had been drawn to its attention while the legislation was still in the House, and had received the endorsement of Senator McClellan, the sponsor of S. 30, who was of the view that the provision would be “a major new tool in extirpating the baneful influence of organized crime in our economic life.” Id., at 25190.

III

The language of RICO gives no obvious indication that a civil action can proceed only after a criminal conviction. The word “conviction” does not appear in any relevant portion of the statute. See §§ 1961, 1962, 1964(c). To the contrary, the predicate acts involve conduct that is “chargeable” or “indictable,” and “offense[s]” that are “punishable,” under various criminal statutes. § 1961(1). As defined in the statute, racketeering activity consists not of acts for which the defendant has been convicted, but of acts for which he could be. See also S. Rep. No. 91-617, p. 158 (1969): “a racketeering activity . . . must be an act in itself subject to criminal sanction” (emphasis added). Thus, a prior-conviction requirement cannot be found in the definition of “racketeering activity.” Nor can it be found in § 1962, which sets out the statute’s substantive provisions. Indeed, if either § 1961 or § 1962 did contain such a requirement, a prior conviction would also be a prerequisite, nonsensically, for a criminal prosecution, or for a civil action by the Government to enjoin violations that had not yet occurred.

The Court of Appeals purported to discover its prior-conviction requirement in the term “violation” in § 1964(c). 741 F. 2d, at 498-499. However, even if that term were 489*489 read to refer to a criminal conviction, it would require a conviction under RICO, not of the predicate offenses. That aside, the term “violation” does not imply a criminal conviction. See United States v. Ward, 448 U. S. 242, 249-250 (1980). It refers only to a failure to adhere to legal requirements. This is its indisputable meaning elsewhere in the statute. Section 1962 renders certain conduct “unlawful”; § 1963 and § 1964 impose consequences, criminal and civil, for “violations” of § 1962. We should not lightly infer that Congress intended the term to have wholly different meanings in neighboring subsections.[7]

The legislative history also undercuts the reading of the court below. The clearest current in that history is the reliance on the Clayton Act model, under which private and governmental actions are entirely distinct. E. g., United States v. Borden Co., 347 U. S. 514, 518-519 (1954).[8] The only 490*490 specific reference in the legislative history to prior convictions of which we are aware is an objection that the treble-damages provision is too broad precisely because “there need not be a conviction under any of these laws for it to be racketeering.” 116 Cong. Rec. 35342 (1970) (emphasis added). The history is otherwise silent on this point and contains nothing to contradict the import of the language appearing in the statute. Had Congress intended to impose this novel requirement, there would have been at least some mention of it in the legislative history, even if not in the statute.

The Court of Appeals was of the view that its narrow construction of the statute was essential to avoid intolerable practical consequences.[9] First, without a prior conviction to rely on, the plaintiff would have to prove commission of the predicate acts beyond a reasonable doubt. This would require instructing the jury as to different standards of proof for different aspects of the case. To avoid this awkwardness, 491*491 the court inferred that the criminality must already be established, so that the civil action could proceed smoothly under the usual preponderance standard.

We are not at all convinced that the predicate acts must be established beyond a reasonable doubt in a proceeding under § 1964(c). In a number of settings, conduct that can be punished as criminal only upon proof beyond a reasonable doubt will support civil sanctions under a preponderance standard. See, e. g., United States v. One Assortment of 89 Firearms, 465 U. S. 354 (1984); One Lot Emerald Cut Stones v. United States, 409 U. S. 232, 235 (1972); Helvering v. Mitchell, 303 U. S. 391, 397 (1938); United States v. Regan, 232 U. S. 37, 47-49 (1914). There is no indication that Congress sought to depart from this general principle here. See Measures Relating to Organized Crime, Hearings on S. 30 et al. before the Subcommittee on Criminal Laws and Procedures of the Senate Committee on the Judiciary, 91st Cong., 1st Sess., 388 (1969) (statement of Assistant Attorney General Wilson); House Hearings, at 520 (statement of Rep. Steiger); id., at 664 (statement of Rep. Poff); 116 Cong. Rec. 35313 (1970) (statement of Rep. Minish). That the offending conduct is described by reference to criminal statutes does not mean that its occurrence must be established by criminal standards or that the consequences of a finding of liability in a private civil action are identical to the consequences of a criminal conviction. Cf. United States v. Ward, supra, at 248-251. But we need not decide the standard of proof issue today. For even if the stricter standard is applicable to a portion of the plaintiff’s proof, the resulting logistical difficulties, which are accepted in other contexts, would not be so great as to require invention of a requirement that cannot be found in the statute and that Congress, as even the Court of Appeals had to concede, 741 F. 2d, at 501, did not envision.[10]

492*492 The court below also feared that any other construction would raise severe constitutional questions, as it “would provide civil remedies for offenses criminal in nature, stigmatize defendants with the appellation `racketeer,’ authorize the award of damages which are clearly punitive, including attorney’s fees, and constitute a civil remedy aimed in part to avoid the constitutional protections of the criminal law.” Id., at 500, n. 49. We do not view the statute as being so close to the constitutional edge. As noted above, the fact that conduct can result in both criminal liability and treble damages does not mean that there is not a bona fide civil action. The familiar provisions for both criminal liability and treble damages under the antitrust laws indicate as much. Nor are attorney’s fees “clearly punitive.” Cf. 42 U. S. C. § 1988. As for stigma, a civil RICO proceeding leaves no greater stain than do a number of other civil proceedings. Furthermore, requiring conviction of the predicate acts would not protect against an unfair imposition of the “racketeer” label. If there is a problem with thus stigmatizing a garden variety defrauder by means of a civil action, it is not reduced by making certain that the defendant is guilty of fraud beyond a reasonable doubt. Finally, to the extent an 493*493 action under § 1964(c) might be considered quasi-criminal, requiring protections normally applicable only to criminal proceedings, cf. One 1958 Plymouth Sedan v. Pennsylvania, 380 U. S. 693 (1965), the solution is to provide those protections, not to ensure that they were previously afforded by requiring prior convictions.[11]

Finally, we note that a prior-conviction requirement would be inconsistent with Congress’ underlying policy concerns. Such a rule would severely handicap potential plaintiffs. A guilty party may escape conviction for any number of reasons — not least among them the possibility that the Government itself may choose to pursue only civil remedies. Private attorney general provisions such as § 1964(c) are in part designed to fill prosecutorial gaps. Cf. Reiter v. Sonotone Corp., 442 U. S. 330, 344 (1979). This purpose would be largely defeated, and the need for treble damages as an incentive to litigate unjustified, if private suits could be maintained only against those already brought to justice. See also n. 9, supra.

In sum, we can find no support in the statute’s history, its language, or considerations of policy for a requirement that a private treble-damages action under § 1964(c) can proceed only against a defendant who has already been criminally convicted. To the contrary, every indication is that no such requirement exists. Accordingly, the fact that Imrex and the individual defendants have not been convicted under RICO or the federal mail and wire fraud statutes does not bar Sedima’s action.

IV

In considering the Court of Appeals’ second prerequisite for a private civil RICO action — “injury . . . caused by an 494*494 activity which RICO was designed to deter” — we are somewhat hampered by the vagueness of that concept. Apart from reliance on the general purposes of RICO and a reference to “mobsters,” the court provided scant indication of what the requirement of racketeering injury means. It emphasized Congress’ undeniable desire to strike at organized crime, but acknowledged and did not purport to overrule Second Circuit precedent rejecting a requirement of an organized crime nexus. 741 F. 2d, at 492; see Moss v. Morgan Stanley, Inc., 719 F. 2d 5, 21 (CA2 1983), cert. denied sub nom. Moss v. Newman, 465 U. S. 1025 (1984). The court also stopped short of adopting a “competitive injury” requirement; while insisting that the plaintiff show “the kind of economic injury which has an effect on competition,” it did not require “actual anticompetitive effect.” 741 F. 2d, at 496; see also id., at 495, n. 40.

The court’s statement that the plaintiff must seek redress for an injury caused by conduct that RICO was designed to deter is unhelpfully tautological. Nor is clarity furnished by a negative statement of its rule: standing is not provided by the injury resulting from the predicate acts themselves. That statement is itself apparently inaccurate when applied to those predicate acts that unmistakably constitute the kind of conduct Congress sought to deter. See id., at 496, n. 41. The opinion does not explain how to distinguish such crimes from the other predicate acts Congress has lumped together in § 1961(1). The court below is not alone in struggling to define “racketeering injury,” and the difficulty of that task itself cautions against imposing such a requirement.[12]

495*495 We need not pinpoint the Second Circuit’s precise holding, for we perceive no distinct “racketeering injury” requirement. Given that “racketeering activity” consists of no more and no less than commission of a predicate act, § 1961(1), we are initially doubtful about a requirement of a “racketeering injury” separate from the harm from the predicate acts. A reading of the statute belies any such requirement. Section 1964(c) authorizes a private suit by “[a]ny person injured in his business or property by reason of a violation of § 1962.” Section 1962 in turn makes it unlawful for “any person” — not just mobsters — to use money derived from a pattern of racketeering activity to invest in an enterprise, to acquire control of an enterprise through a pattern of racketeering activity, or to conduct an enterprise through a pattern of racketeering activity. §§ 1962(a)-(c). If the defendant engages in a pattern of racketeering activity in a manner forbidden by these provisions, and the racketeering activities injure the plaintiff in his business or property, the plaintiff has a claim under § 1964(c). There is no room in the statutory language for an additional, amorphous “racketeering injury” requirement.[13]

496*496 A violation of § 1962(c), the section on which Sedima relies, requires (1) conduct (2) of an enterprise (3) through a pattern[14] (4) of racketeering activity. The plaintiff must, of course, allege each of these elements to state a claim. Conducting an enterprise that affects interstate commerce is obviously not in itself a violation of § 1962, nor is mere commission of the predicate offenses. In addition, the plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation. As the Seventh Circuit has stated, “[a] defendant who violates section 1962 is not liable 497*497 for treble damages to everyone he might have injured by other conduct, nor is the defendant liable to those who have not been injured.” Haroco, Inc. v. American National Bank & Trust Co. of Chicago, 747 F. 2d 384, 398 (1984), aff’d, post, p. 606.

But the statute requires no more than this. Where the plaintiff alleges each element of the violation, the compensable injury necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern, for the essence of the violation is the commission of those acts in connection with the conduct of an enterprise. Those acts are, when committed in the circumstances delineated in § 1962(c), “an activity which RICO was designed to deter.” Any recoverable damages occurring by reason of a violation of § 1962(c) will flow from the commission of the predicate acts.[15]

This less restrictive reading is amply supported by our prior cases and the general principles surrounding this statute. RICO is to be read broadly. This is the lesson not only 498*498 of Congress’ self-consciously expansive language and overall approach, see United States v. Turkette, 452 U. S. 576, 586-587 (1981), but also of its express admonition that RICO is to “be liberally construed to effectuate its remedial purposes,” Pub. L. 91-452, § 904(a), 84 Stat. 947. The statute’s “remedial purposes” are nowhere more evident than in the provision of a private action for those injured by racketeering activity. See also n. 10, supra. Far from effectuating these purposes, the narrow readings offered by the dissenters and the court below would in effect eliminate § 1964(c) from the statute.

RICO was an aggressive initiative to supplement old remedies and develop new methods for fighting crime. See generally Russello v. United States, 464 U. S. 16, 26-29 (1983). While few of the legislative statements about novel remedies and attacking crime on all fronts, see ibid., were made with direct reference to § 1964(c), it is in this spirit that all of the Act’s provisions should be read. The specific references to § 1964(c) are consistent with this overall approach. Those supporting § 1964(c) hoped it would “enhance the effectiveness of title IX’s prohibitions,” House Hearings, at 520, and provide “a major new tool,” 116 Cong. Rec. 35227 (1970). See also id., at 25190; 115 Cong. Rec. 6993-6994 (1969). Its opponents, also recognizing the provision’s scope, complained that it provided too easy a weapon against “innocent businessmen,” H. R. Rep. No. 91-1549, p. 187 (1970), and would be prone to abuse, 116 Cong. Rec. 35342 (1970). It is also significant that a previous proposal to add RICO-like provisions to the Sherman Act had come to grief in part precisely because it “could create inappropriate and unnecessary obstacles in the way of . . . a private litigant [who] would have to contend with a body of precedent — appropriate in a purely antitrust context — setting strict requirements on questions such as `standing to sue’ and `proximate cause.’ ” 115 Cong. Rec. 6995 (1969) (ABA comments on S. 2048); see also id., at 6993 (S. 1623 proposed as an amendment to Title 18 to avoid these problems). In borrowing its “racketeering 499*499 injury” requirement from antitrust standing principles, the court below created exactly the problems Congress sought to avoid.

Underlying the Court of Appeals’ holding was its distress at the “extraordinary, if not outrageous,” uses to which civil RICO has been put. 741 F. 2d, at 487. Instead of being used against mobsters and organized criminals, it has become a tool for everyday fraud cases brought against “respected and legitimate `enterprises.’ ” Ibid. Yet Congress wanted to reach both “legitimate” and “illegitimate” enterprises. United States v. Turkette, supra. The former enjoy neither an inherent incapacity for criminal activity nor immunity from its consequences. The fact that § 1964(c) is used against respected businesses allegedly engaged in a pattern of specifically identified criminal conduct is hardly a sufficient reason for assuming that the provision is being misconstrued. Nor does it reveal the “ambiguity” discovered by the court below. “[T]he fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth.” Haroco, Inc. v. American National Bank & Trust Co. of Chicago, supra, at 398.

It is true that private civil actions under the statute are being brought almost solely against such defendants, rather than against the archetypal, intimidating mobster.[16] Yet this defect — if defect it is — is inherent in the statute as written, and its correction must lie with Congress. It is not for the judiciary to eliminate the private action in situations 500A*500A where Congress has provided it simply because plaintiffs are not taking advantage of it in its more difficult applications.

We nonetheless recognize that, in its private civil version, RICO is evolving into something quite different from the original conception of its enactors. See generally ABA Report, at 55-69. Though sharing the doubts of the Court of Appeals about this increasing divergence, we cannot agree with either its diagnosis or its remedy. The “extraordinary” uses to which civil RICO has been put appear to be primarily the result of the breadth of the predicate offenses, in particular the inclusion of wire, mail, and securities fraud, and the failure of Congress and the courts to develop a meaningful concept of “pattern.” We do not believe that the amorphous standing requirement imposed by the Second Circuit effectively responds to these problems, or that it is a form of statutory amendment appropriately undertaken by the courts.

V

Sedima may maintain this action if the defendants conducted the enterprise through a pattern of racketeering activity. The questions whether the defendants committed the requisite predicate acts, and whether the commission of those acts fell into a pattern, are not before us. The complaint is not deficient for failure to allege either an injury separate from the financial loss stemming from the alleged acts of mail and wire fraud, or prior convictions of the defendants. The judgment below is accordingly reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

500B*500B JUSTICE MARSHALL, with whom JUSTICE BRENNAN, JUSTICE BLACKMUN, and JUSTICE POWELL join, dissenting.[*]

The Court today recognizes that “in its private civil version, RICO is evolving into something quite different from 501*501 the original conception of its enactors.” Ante, at 500. The Court, however, expressly validates this result, imputing it to the manner in which the statute was drafted. I fundamentally disagree both with the Court’s reading of the statute and with its conclusion. I believe that the statutory language and history disclose a narrower interpretation of the statute that fully effectuates Congress’ purposes, and that does not make compensable under civil RICO a host of claims that Congress never intended to bring within RICO’s purview.

I

The Court’s interpretation of the civil RICO statute quite simply revolutionizes private litigation; it validates the federalization of broad areas of state common law of frauds, and it approves the displacement of well-established federal remedial provisions. We do not lightly infer a congressional intent to effect such fundamental changes. To infer such intent here would be untenable, for there is no indication that Congress even considered, much less approved, the scheme that the Court today defines.

The single most significant reason for the expansive use of civil RICO has been the presence in the statute, as predicate acts, of mail and wire fraud violations. See 18 U. S. C. § 1961(1) (1982 ed., Supp. III). Prior to RICO, no federal statute had expressly provided a private damages remedy based upon a violation of the mail or wire fraud statutes, which make it a federal crime to use the mail or wires in furtherance of a scheme to defraud. See 18 U. S. C. §§ 1341, 1343. Moreover, the Courts of Appeals consistently had held that no implied federal private causes of action accrue to victims of these federal violations. See, e. g., Ryan v. Ohio Edison Co., 611 F. 2d 1170, 1178-1179 (CA6 1979) (mail fraud); Napper v. Anderson, Henley, Shields, Bradford & Pritchard, 500 F. 2d 634, 636 (CA5 1974) (wire fraud), cert. denied, 423 U. S. 837 (1975). The victims normally were restricted to bringing actions in state court under common-law fraud theories.

502*502 Under the Court’s opinion today, two fraudulent mailings or uses of the wires occurring within 10 years of each other might constitute a “pattern of racketeering activity,” § 1961 (5), leading to civil RICO liability. See § 1964(c). The effects of making a mere two instances of mail or wire fraud potentially actionable under civil RICO are staggering, because in recent years the Courts of Appeals have “tolerated an extraordinary expansion of mail and wire fraud statutes to permit federal prosecution for conduct that some had thought was subject only to state criminal and civil law.” United States v. Weiss, 752 F. 2d 777, 791 (CA2 1985) (Newman, J., dissenting). In bringing criminal actions under those statutes, prosecutors need not show either a substantial connection between the scheme to defraud and the mail and wire fraud statutes, see Pereira v. United States, 347 U. S. 1, 8 (1954), or that the fraud involved money or property. Courts have sanctioned prosecutions based on deprivations of such intangible rights as a shareholder’s right to “material” information, United States v. Siegel, 717 F. 2d 9, 14-16 (CA2 1983); a client’s right to the “undivided loyalty” of his attorney, United States v. Bronston, 658 F. 2d 920, 927 (CA2 1981), cert. denied, 456 U. S. 915 (1982); an employer’s right to the honest and faithful service of his employees, United States v. Bohonus, 628 F. 2d 1167, 1172 (CA9), cert. denied, 447 U. S. 928 (1980); and a citizen’s right to know the nature of agreements entered into by the leaders of political parties, United States v. Margiotta, 688 F. 2d 108, 123-125 (CA2 1982), cert. denied, 461 U. S. 913 (1983).

The only restraining influence on the “inexorable expansion of the mail and wire fraud statutes,” United States v. Siegel, supra, at 24 (Winter, J., dissenting in part and concurring in part), has been the prudent use of prosecutorial discretion. Prosecutors simply do not invoke the mail and wire fraud provisions in every case in which a violation of the relevant statute can be proved. See U. S. Dept. of Justice, United States Attorney’s Manual § 9-43.120 (Feb. 16, 1984). 503*503 For example, only where the scheme is directed at a “class of persons or the general public” and includes “a substantial pattern of conduct,” will “serious consideration . . . be given to [mail fraud] prosecution.” In all other cases, “the parties should be left to settle their differences by civil or criminal litigation in the state courts.” Ibid.

The responsible use of prosecutorial discretion is particularly important with respect to criminal RICO prosecutions — which often rely on mail and wire fraud as predicate acts — given the extremely severe penalties authorized by RICO’s criminal provisions. Federal prosecutors are therefore instructed that “[u]tilization of the RICO statute, more so than most other federal criminal sanctions, requires particularly careful and reasoned application.” Id., § 9-110.200 (Mar. 9, 1984). The Justice Department itself recognizes that a broad interpretation of the criminal RICO provisions would violate “the principle that the primary responsibility for enforcing state laws rests with the state concerned.” Ibid. Specifically, the Justice Department will not bring RICO prosecutions unless the pattern of racketeering activity required by 18 U. S. C. § 1962 has “some relation to the purpose of the enterprise.” United States Attorney’s Manual § 9-110.350 (Mar. 9, 1984).

Congress was well aware of the restraining influence of prosecutorial discretion when it enacted the criminal RICO provisions. It chose to confer broad statutory authority on the Executive fully expecting that this authority would be used only in cases in which its use was warranted. See Measures Relating to Organized Crime: Hearings on S. 30 et al. before the Subcommittee on Criminal Laws and Procedures of the Senate Committee on the Judiciary, 91st Cong., 1st Sess., 346-347, 424 (1969) (hereinafter cited as Senate Hearings). Moreover, in seeking a broad interpretation of RICO from this Court in United States v. Turkette, 452 U. S. 576 (1981), the Government stressed that no “extreme cases” would be brought because the Justice Department would exercise 504*504 “sound discretion” through a centralized review process. See Brief for United States in No. 80-808, O. T. 1980, p. 25, n. 20.

In the context of civil RICO, however, the restraining influence of prosecutors is completely absent. Unlike the Government, private litigants have no reason to avoid displacing state common-law remedies. Quite to the contrary, such litigants, lured by the prospect of treble damages and attorney’s fees, have a strong incentive to invoke RICO’s provisions whenever they can allege in good faith two instances of mail or wire fraud. Then the defendant, facing a tremendous financial exposure in addition to the threat of being labeled a “racketeer,” will have a strong interest in settling the dispute. See Rakoff, Some Personal Reflections on the Sedima Case and on Reforming RICO, in RICO: Civil and Criminal 400 (Law Journal Seminars-Press 1984). The civil RICO provision consequently stretches the mail and wire fraud statutes to their absolute limits and federalizes important areas of civil litigation that until now were solely within the domain of the States.

In addition to altering fundamentally the federal-state balance in civil remedies, the broad reading of the civil RICO provision also displaces important areas of federal law. For example, one predicate offense under RICO is “fraud in the sale of securities.” 18 U. S. C. § 1961(1) (1982 ed., Supp. III). By alleging two instances of such fraud, a plaintiff might be able to bring a case within the scope of the civil RICO provision. It does not take great legal insight to realize that such a plaintiff would pursue his case under RICO rather than do so solely under the Securities Act of 1933 or the Securities Exchange Act of 1934, which provide both express and implied causes of action for violations of the federal securities laws. Indeed, the federal securities laws contemplate only compensatory damages and ordinarily do not authorize recovery of attorney’s fees. By invoking RICO, in contrast, a successful 505*505 plaintiff will recover both treble damages and attorney’s fees.

More importantly, under the Court’s interpretation, the civil RICO provision does far more than just increase the available damages. In fact, it virtually eliminates decades of legislative and judicial development of private civil remedies under the federal securities laws. Over the years, courts have paid close attention to matters such as standing, culpability, causation, reliance, and materiality, as well as the definitions of “securities” and “fraud.” See, e. g., Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723 (1975) (purchaser/seller requirement). All of this law is now an endangered species because plaintiffs can avoid the limitations of the securities laws merely by alleging violations of other predicate acts. For example, even in cases in which the investment instrument is not a “security” covered by the federal securities laws, RICO will provide a treble-damages remedy to a plaintiff who can prove the required pattern of mail or wire fraud. Cf. Crocker National Bank v. Rockwell International Corp., 555 F. Supp. 47 (ND Cal. 1982). Before RICO, of course, the plaintiff could not have recovered under federal law for the mail or wire fraud violation.

Similarly, a customer who refrained from selling a security during a period in which its market value was declining could allege that, on two occasions, his broker recommended by telephone, as part of a scheme to defraud, that the customer not sell the security. The customer might thereby prevail under civil RICO even though, as neither a purchaser nor a seller, he would not have had standing to bring an action under the federal securities laws. See also 741 F. 2d 482, 499 (1984) (“two misstatements in a proxy solicitation could subject any director in any national corporation to `racketeering’ charges and the threat of treble damages and attorneys’ fees”).

The effect of civil RICO on federal remedial schemes is not limited to the securities laws. For example, even though 506*506 commodities fraud is not a predicate offense listed in § 1961, the carefully crafted private damages causes of action under the Commodity Exchange Act may be circumvented in a commodities case through civil RICO actions alleging mail or wire fraud. See, e. g., Parnes v. Heinold Commodities, Inc., 487 F. Supp. 645 (ND Ill. 1980). The list goes on and on.

The dislocations caused by the Court’s reading of the civil RICO provision are not just theoretical. In practice, this provision frequently has been invoked against legitimate businesses in ordinary commercial settings. As the Court recognizes, the ABA Task Force that studied civil RICO found that 40% of the reported cases involved securities fraud and 37% involved common-law fraud in a commercial or business setting. See ante, at 499, n. 16. Many a prudent defendant, facing ruinous exposure, will decide to settle even a case with no merit. It is thus not surprising that civil RICO has been used for extortive purposes, giving rise to the very evils that it was designed to combat. Report of the Ad Hoc Civil RICO Task Force of the ABA Section of Corporation, Banking and Business Law 69 (1985) (hereinafter cited as ABA Report).

Only 9% of all civil RICO cases have involved allegations of criminal activity normally associated with professional criminals. See ante, at 499, n. 16. The central purpose that Congress sought to promote through civil RICO is now a mere footnote.

In summary, in both theory and practice, civil RICO has brought profound changes to our legal landscape. Undoubtedly, Congress has the power to federalize a great deal of state common law, and there certainly are no relevant constraints on its ability to displace federal law. Those, however, are not the questions that we face in this case. What we have to decide here, instead, is whether Congress in fact intended to produce these far-reaching results.

507*507 Established canons of statutory interpretation counsel against the Court’s reading of the civil RICO provision. First, we do not impute lightly a congressional intention to upset the federal-state balance in the provision of civil remedies as fundamentally as does this statute under the Court’s view. For example, in Santa Fe Industries, Inc. v. Green, 430 U. S. 462 (1977), we stated that “[a]bsent a clear indication of congressional intent, we are reluctant to federalize the substantial portion of the law of corporations that deals with transactions in securities.” Id., at 479. Here, with striking nonchalance, the Court does what it declined to do in Santa Fe Industries — and much more as well. Second, with respect to effects on the federal securities laws and other federal regulatory statutes, we should be reluctant to displace the well-entrenched federal remedial schemes absent clear direction from Congress. See, e. g., Train v. Colorado Public Interest Research Group, Inc., 426 U. S. 1, 23-24 (1976); Radzanower v. Touche Ross & Co., 426 U. S. 148, 153 (1976).

In this case, nothing in the language of the statute or the legislative history suggests that Congress intended either the federalization of state common law or the displacement of existing federal remedies. Quite to the contrary, all that the statute and the legislative history reveal as to these matters is what Judge Oakes called a “clanging silence,” 741 F. 2d, at 492.

Moreover, if Congress had intended to bring about dramatic changes in the nature of commercial litigation, it would at least have paid more than cursory attention to the civil RICO provision. This provision was added in the House of Representatives after the Senate already had passed its version of the RICO bill; the House itself adopted a civil remedy provision almost as an afterthought; and the Senate thereafter accepted the House’s version of the bill without even requesting a Conference. See infra, at 518-519. Congress simply does not act in this way when it intends to effect fundamental changes in the structure of federal law.

508*508 II

The statutory language and legislative history support the view that Congress did not intend to effect a radical alteration of federal civil litigation. In fact, the language and history indicate a congressional intention to limit, in a workable and coherent manner, the type of injury that is compensable under the civil RICO provision. As the following demonstrates, Congress sought to fill an existing gap in civil remedies and to provide a means of compensation that otherwise did not exist for the honest businessman harmed by the economic power of “racketeers.”

A

I begin with a review of the statutory language. Section 1964(c) grants a private right of action to any person “injured in his business or property by reason of a violation of section 1962.” Section 1962, in turn, makes it unlawful to invest, in an enterprise engaged in interstate commerce, funds “derived . . . from a pattern of racketeering activity,” to acquire or operate an interest in any such enterprise through “a pattern of racketeering activity,” or to conduct or participate in the conduct of that enterprise “through a pattern of racketeering activity.” Section 1961 defines “racketeering activity” to mean any of numerous acts “chargeable” or “indictable” under enumerated state and federal laws, including state-law murder, arson, and bribery statutes, federal mail and wire fraud statutes, and the antifraud provisions of federal securities laws. It states that “a pattern” of racketeering activity requires proof of at least two acts of racketeering within 10 years.

By its terms, § 1964(c) therefore grants a cause of action only to a person injured “by reason of a violation of § 1962.” The Court holds today that the only injury a plaintiff need allege is injury occurring by reason of a predicate, or racketeering, act — i. e., one of the offenses listed in § 1961. But § 1964(c) does not by its terms provide a remedy for injury by 509*509 reason of § 1961; it requires an injury by reason of § 1962. In other words:

“While section 1962 prohibits the involvement of an `enterprise’ in `racketeering activity,’ racketeering itself is not a violation of § 1962. Thus, a construction of RICO permitting recovery for damages arising out of the racketeering acts simply does not comport with the statute as written by Congress. In effect, the broad construction replaces the rule that treble damages can be recovered only when they occur `by reason of a violation of section 1962,’ with a rule permitting recovery of treble damages whenever there has been a violation of section 1962. Such unwarranted judicial interference with the Act’s plain meaning cannot be justified.” Comment, 76 Nw. U. L. Rev. 100, 128 (1981) (footnotes omitted).

See also Bridges, Private RICO Litigation Based Upon “Fraud in the Sale of Securities,” 18 Ga. L. Rev. 43, 67 (1983).

In addition, the statute permits recovery only for injury to business or property. It therefore excludes recovery for personal injuries. However, many of the predicate acts listed in § 1961 threaten or inflict personal injuries — such as murder and kidnaping. If Congress in fact intended the victims of the predicate acts to recover for their injuries, as the Court holds it did, it is inexplicable why Congress would have limited recovery to business or property injury. It simply makes no sense to allow recovery by some, but not other victims of predicate acts, and to make recovery turn solely on whether the defendant has chosen to inflict personal pain or harm to property in order to accomplish its end.

In summary, the statute clearly contemplates recovery for injury resulting from the confluence of events described in § 1962 and not merely from the commission of a predicate act. The Court’s contrary interpretation distorts the statutory language under the guise of adopting a plain-meaning definition, and it does so without offering any indication of congressional 510*510 intent that justifies a deviation from what I have shown to be the plain meaning of the statute. However, even if the statutory language were ambiguous, see Haroco, Inc. v. American National Bank & Trust Co. of Chicago, 747 F. 2d 384, 389 (CA7 1984), aff’d, post, p. 606, the scope of the civil RICO provision would be no different, for this interpretation of the statute finds strong support in the legislative history of that provision.

B

In reviewing the legislative history of civil RICO, numerous federal courts have become mired in controversy about the extent to which Congress intended to adopt or reject the federal antitrust laws as a model for the RICO provisions. The basis for the dispute among the lower courts is the language of the treble-damages provision, which tracks virtually word for word the treble-damages provision of the antitrust laws, § 4 of the Clayton Act;[1] given this parallel, there can be little doubt that the latter served as a model for the former. Some courts have relied heavily on this congruity to read an antitrust-type “competitive injury” requirement into the civil RICO statute. See, e. g., North Barrington Development, Inc. v. Fanslow, 547 F. Supp. 207 (ND Ill. 1980). Other courts have rejected a competitive-injury requirement, or any antitrust analogy, relying in significant part on what 511*511 they perceive as Congress’ rejection of a wholesale adoption of antitrust precedent. See, e. g., Yancoski v. E. F. Hutton & Co., Inc., 581 F. Supp. 88 (ED Pa. 1983); Mauriber v. Shearson/American Express, Inc., 567 F. Supp. 1231, 1240 (SDNY 1983).

Many of these courts have read far too much into the antitrust analogy. The legislative history makes clear that Congress viewed the form of civil remedies under RICO as analogous to such remedies under the antitrust laws, but that it did not thereby intend the substantive compensable injury to be exactly the same. The legislative history also suggests that Congress might have wanted to avoid saddling the civil RICO provisions with the same standing requirements that at the time limited standing to sue under the antitrust laws. However, the Committee Reports and hearings in no way suggest that Congress considered and rejected a requirement of injury separate from that resulting from the predicate acts. Far from it, Congress offered considerable indication that the kind of injury it primarily sought to attack and compensate was that for which existing civil and criminal remedies were inadequate or nonexistent; the requisite injury is thus akin to, but broader than, that targeted by the antitrust laws and different in kind from that resulting from the underlying predicate acts.

A brief look at the legislative history makes clear that the antitrust laws in no relevant respect constrain our analysis or preclude formulation of an independent RICO-injury requirement. When Senator Hruska first introduced to Congress the predecessor to RICO, he proposed an amendment to the Sherman Act that would have prohibited the investment or use of intentionally unreported income from one line of business to establish, operate, or invest in another line of business. S. 2048, 90th Cong., 1st Sess. (1967). After studying the provision, the American Bar Association issued a report that, while acknowledging the effects of organized crime’s infiltration of legitimate business, stated a preference for a 512*512 provision separate from the antitrust laws. See 115 Cong. Rec. 6994 (1969). According to the report:

“By placing the antitrust-type enforcement and recovery procedures in a separate statute, a commingling of criminal enforcement goals with the goals of regulating competition is avoided.

…..

“Moreover, the use of antitrust laws themselves as a vehicle for combating organized crime could create inappropriate and unnecessary obstacles in the way of persons injured by organized crime who might seek treble damage recovery. Such a private litigant would have to contend with a body of precedent — appropriate in a purely antitrust context — setting strict requirements on questions such as `standing to sue’ and `proximate cause.’ ” Id., at 6995.

Congress subsequently decided not to pursue an addition to the antitrust laws but instead to fashion a wholly separate criminal statute. If in fact that decision was made in response to the ABA’s statement and not to other political concerns, it may be interpreted at most as a rejection of antitrust standing requirements. Court-developed standing rules define the requisite proximity between the plaintiff’s injury and the defendant’s antitrust violation. See Blue Shield of Virginia v. McCready, 457 U. S. 465, 476 (1982) (discussing antitrust standing rules developed in the Federal Circuits). Thus, at most we may read the early legislative history to eschew wholesale adoption of the particular nexus requirements that limit the class of potential antitrust plaintiffs. Courts that read this history to bar any analogy to the antitrust laws simply read too much into the scant evidence available to us. In particular, courts that read this history to bar an injury requirement akin to “antitrust” injury are in error. The requirement of antitrust injury, as articulated in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U. S. 477 (1977), differs in kind from the standing requirement to 513*513 which the ABA referred and, in fact, had not been articulated at the time of the ABA comments.

At the same time, courts that believe civil RICO doctrine should mirror civil antitrust doctrine also read too much into the legislative history. It is absolutely clear that Congress intended to adopt antitrust remedies, such as civil actions by the Government and treble damages. The House of Representatives added the civil provision to Title IX in response to suggestions from the ABA and Congressmen that there be a remedy “similar to the private damage remedy found in the anti-trust laws,” Organized Crime Control: Hearings on S. 30 and Related Proposals, before Subcommittee No. 5 of the House Committee on the Judiciary, 91st Cong., 2d Sess., 520 (1970) (statement of Rep. Steiger) (hereinafter House Hearings); see also id., at 543 (statement of Edward L. Wright, ABA president-elect) (suggesting an amendment “to include the additional civil remedy of authorizing private damage suits based upon the concept of Section 4 of the Clayton (Antitrust) Act”); 116 Cong. Rec. 35295 (1970) (remarks of Rep. Poff, chief spokesman for the bill) (explaining bill’s adoption of the antitrust remedy for use against organized crime). The decision to adopt antitrust remedies does not, however, compel the conclusion that Congress intended to adopt substantive antitrust doctrine. Courts that construe these references to the antitrust laws as indications of Congress’ intent to adopt the substance of antitrust doctrine also read too much into too little language.

C

While the foregoing establishes that Congress sought to adopt remedies akin to those used in antitrust law — such as civil government enforcement — and to reject antitrust standing rules, other portions of the legislative history reveal just what Congress intended the substantive dimensions of the civil action to be. Quite simply, its principal target was the economic power of racketeers, and its toll on legitimate businessmen. 514*514 To this end, Congress sought to fill a gap in the civil and criminal laws and to provide new remedies broader than those already available to private or government antitrust plaintiffs, different from those available to government and private citizens under state and federal laws, and significantly narrower than those adopted by the Court today.

In 1967, Senator Hruska proposed two bills, S. 2048 and S. 2049, 90th Cong., 1st Sess., which were designed in part to implement recommendations of the President’s Commission on Law Enforcement and the Administration of Justice (the Katzenbach Commission) on the fight against organized crime. See 113 Cong. Rec. 17998-18001 (1967). The former bill proposed an amendment to the Sherman Act prohibiting the investment or use of unreported income derived from one line of business in another business. Id., at 17999. The latter bill, which was separate from the Sherman Act, prohibited the acquisition of a business interest with income derived from criminal activity. Ibid. Representative Poff introduced similar bills in the House of Representatives. See H. R. 11266, H. R. 11268, 90th Cong., 1st Sess. (1967); 113 Cong. Rec. 17976 (1967).

Introducing S. 2048, Senator Hruska explained that “[b]y limiting its application to intentionally unreported income, this proposal highlights the fact that the evil to be curbed is the unfair competitive advantage inherent in the large amount of illicit income available to organized crime.” Id., at 17999 (emphasis added). He described how organized crime had infiltrated a wide range of businesses, and he observed that “[i]n each of these instances, large amounts of cash coupled with threats of violence, extortion, and similar techniques were utilized by mobsters to achieve their desired objectives: monopoly control of these enterprises.” Id., at 17998 (emphasis added). He identified four means by which control of legitimate business had been acquired:

“First. Investing concealed profits acquired from gambling and other illegal enterprises.

515*515 “Second. Accepting business interests in payment of the owner’s gambling debts.

“Third. Foreclosing on usurious loans.

“Fourth. Using various forms of extortion.” Id., at 17998-17999.

The Senator then explained how this infiltration takes its toll:

“The proper functioning of a free economy requires that economic decisions be made by persons free to exercise their own judgment. Force or fear limits choice, ultimately reduces quality, and increases prices. When organized crime moves into a business, it brings all the techniques of violence and intimidation which it used in its illegal businesses. Competitors are eliminated and customers confined to sponsored suppliers. Its effect is even more unwholesome than other monopolies because its position does not rest on economic superiority.” Id., at 17999.

Congress never took action on these bills.

In 1969, Senator McClellan introduced the Organized Crime Control Act, which altered numerous criminal law areas such as grand juries, immunity, and sentencing, but which contained no provision like that now known as RICO. See S. 30, 91st Cong., 1st Sess.; 115 Cong. Rec. 769 (1969). Shortly thereafter, Senator Hruska introduced the Criminal Activities Profits Act. S. 1623, 91st Cong., 1st Sess.; 115 Cong. Rec. 6995-6996 (1969). He explained that S. 1623 was designed to synthesize the earlier two bills (S. 2048 and S. 2049) while placing the “unified whole” outside the Sherman Act in response to the ABA’s concerns. According to the Senator, the bill was meant to attack “the economic power of organized crime and its exercise of unfair competition with honest businessmen,” and to address “[t]he power of organized crime to establish a monopoly within numerous business fields” and the impact on the free market and honest 516*516 competitors of “a racketeer dominated venture.” Id., at 6993 (emphasis added).

As introduced, S. 1623 contained a provision for a private treble-damages action; the language of that provision was virtually identical to that in § 1964(c), and it likely served as the model for § 1964(c). See id., at 6996. Explaining this provision, Senator Hruska said:

“In addition to this criminal prohibition, the bill also creates civil remedies for the honest businessman who has been damaged by unfair competition from the racketeer businessman. Despite the willingness of the courts to apply the Sherman Anti-Trust Act to organized crime activities, as a practical matter the legitimate businessman does not have adequate civil remedies available under that act. This bill fills that gap.” Id., at 6993 (emphasis added).

The Senate did not act directly on either S. 30 or S. 1623. Instead, Senators McClellan and Hruska jointly introduced S. 1861, the Corrupt Organizations Act of 1969, 91st Cong., 1st Sess.; 115 Cong. Rec. 9568-9571, which combined features of the two other bills and added to them. The new bill expanded the list of offenses that would constitute “racketeering activity” and required that the proscribed conduct be committed through a pattern of “racketeering activity.” It did not, however, contain a private civil remedy provision, but only authorization for an injunctive action brought by the Attorney General. Senator McClellan thereafter requested that the provisions of S. 1861 be incorporated by amendment into the broad Organized Crime Control Act, S. 30. See 115 Cong. Rec. 9566-9571 (1969).

In December 1969, the Senate Judiciary Committee reported on the Organized Crime Control Act, S. 30, as amended to include S. 1861 as Title IX, “Racketeer Influenced and Corrupt Organizations.” Title IX, it is clear, was 517*517 aimed at precisely the same evil that Senator Hruska had targeted in 1967 — the infiltration of legitimate business by organized crime. According to the Committee Report, the Title

“has as its purpose the elimination of the infiltration of organized crime and racketeering into legitimate organizations operating in interstate commerce. It seeks to achieve this objective by the fashioning of new criminal and civil remedies and investigative procedures.” S. Rep. No. 91-617, p. 76 (1969).

In language taken virtually verbatim from the earlier floor statements of Senator Hruska, the Report described the extraordinary range of legitimate businesses and unions that had been infiltrated by racketeers, and the means by which the racketeers sought to profit from the infiltration. It described “scams” involving bankruptcy and insurance fraud, and the use of “force or fear” to secure a monopoly in the service or product of the business, and it summed up: “When the campaign is successful, the organization begins to extract a premium price from customers.” Id., at 77.

Similarly, Senator Byrd spoke in favor of Title IX and gave other examples of the “awesome power” of racketeers and their methods of operation. He described, for example, how one racketeer had gained a foothold in a detergent company and then had used arson and murder to try to get the A & P Tea Co. to buy a detergent that A & P had tested and rejected. 116 Cong. Rec. 607 (1970). As another example, he explained that racketeers would corner the market on a good or service and then withhold it from a businessman until he surrendered his business or made some other related economic concession. Ibid. In each of these cases, I note, the racketeer engaged in criminal acts in order to accomplish a commercial goal — e. g., to destroy competition, create a monopoly, or infiltrate a legitimate business. See also id., at 602 (statement of Sen. Hruska) (“[Organized crime] employs 518*518 physical brutality, fear and corruption to intimidate competitors and customers to achieve increased sales and profits”) (emphasis added). In sum, “[s]crutiny of the Senate Report. . . establishes without a doubt a single dominating purpose of the Senate in proposing the RICO statute: “Title IX represents the committee’s careful efforts to fashion new remedies to deal with the infiltration of organized crime into legitimate organizations operating in interstate commerce.’ ” ABA Report 105.

The bill passed the Senate after a short debate by a vote of 73 to 1, without a treble-damages provision, and it was then considered by the House. In hearings before the House Judiciary Committee, it was suggested that the bill should include “the additional civil remedy of authorizing private damage suits based upon the concept of Section 4 of the Clayton Act.” House Hearings, at 543-544 (statement of Edward Wright, ABA president-elect); see also id., at 520 (statement of Rep. Steiger) (suggesting addition of a private civil damages remedy). Before reporting the bill favorably in September 1970, the House Judiciary Committee made one change to the civil remedy provision — it added a private treble-damages provision to the civil remedies already available to the Government; the Committee accorded this change only a single statement in the Committee Report: “The title, as amended, also authorizes civil treble damage suits on the part of private parties who are injured.” H. R. Rep. No. 91-1549, p. 35 (1970). Three Congressmen dissented from the Report. Their views are particularly telling because, with language that is narrow compared to the extraordinary scope the civil provision has acquired, these three challenged the possible breadth and abuse of the private civil remedy by plaintiff-competitors:

“Indeed, [§ 1964(c)] provides invitation for disgruntled and malicious competitors to harass innocent businessmen 519*519 engaged in interstate commerce by authorizing private damage suits. A competitor need only raise the claim that his rival has derived gains from two games of poker, and, because this title prohibits even the `indirect use’ of such gains — a provision with tremendous outreach — litigation is begun. What a protracted, expensive trial may not succeed in doing, the adverse publicity may well accomplish — destruction of the rival’s business.” Id., at 187 (emphasis added).

The bill then returned to the Senate, which passed it without a conference, apparently to assure passage during the session. Thus, the private remedy at issue here slipped quietly into the statute, and its entrance evinces absolutely no intent to revolutionize the enforcement scheme, or to give undue breadth to the broadly worded provisions — provisions Congress fully expected Government enforcers to narrow.

Putting together these various pieces, I can only conclude that Congress intended to give to businessmen who might otherwise have had no available remedy a possible way to recover damages for competitive injury, infiltration injury, or other economic injury resulting out of, but wholly distinct from, the predicate acts. Congress fully recognized that racketeers do not engage in predicate acts as ends in themselves; instead, racketeers threaten, burn, and murder in order to induce their victims to act in a way that accrues to the economic benefit of the racketeer, as by ceasing to compete, or agreeing to make certain purchases. Congress’ concern was not for the direct victims of the racketeers’ acts, whom state and federal laws already protected, but for the competitors and investors whose businesses and interests are harmed or destroyed by racketeers, or whose competitive positions decline because of infiltration in the relevant market. Its focus was on the victims of the extraordinary economic power that racketeers are able to acquire through a wide 520*520 range of illicit methods. Indeed, that is why Congress provided for recovery only for injury to business or property — that is, commercial injuries — and not for personal physical or emotional injury.

The only way to give effect to Congress’ concern is to require that plaintiffs plead and prove that they suffered RICO injury — injury to their competitive, investment, or other business interests resulting from the defendant’s conduct of a business or infiltration of a business or a market, through a pattern of racketeering activity. As I shall demonstrate, this requirement is manageable, and it puts the statute to the use to which it was addressed. In addition, this requirement is faithful to the language of the statute, which does not appear to provide recovery for injuries incurred by reason of individual predicate acts. It also avoids most of the “extraordinary uses” to which the statute has been put, in which legitimate businesses that have engaged in two criminal acts have been labeled “racketeers,” have faced treble-damages judgments in favor of the direct victims, and often have settled to avoid the destructive publicity and the resulting harm to reputation. These cases take their toll; their results distort the market by saddling legitimate businesses with uncalled-for punitive bills and undeserved labels. To allow punitive actions and significant damages for injury beyond that which the statute was intended to target is to achieve nothing the statute sought to achieve, and ironically to injure many of those lawful businesses that the statute sought to protect. Under such circumstances, I believe this Court is derelict in its failure to interpret the statute in keeping with the language and intent of Congress.

Several lower courts have remarked, however, that a “RICO injury” requirement, while perhaps contemplated by the statute, defies definition. I disagree. The following series of examples, culled in part from the legislative history of the RICO statute, illustrates precisely what does and does not fall within this definition.

521*521 First. If a “racketeer” uses “[t]hreats, arson and assault. . . to force competitors out of business and obtain larger shares of the market,” House Hearings, at 106 (statement of Sen. McClellan), the threats, arson, and assault represent the predicate acts. The pattern of those acts is designed to accomplish, and accomplishes, the goal of monopolization. Competitors thereby injured or forced out of business could allege “RICO” injury and recover damages for lost profits. So, too, purchasers of the racketeer’s goods or services, who are forced to buy from the racketeer/monopolist at higher prices, and whose businesses therefore are injured, might recover damages for the excess costs of doing business. The direct targets of the predicate acts — whether competitors, suppliers, or others — could recover for damages flowing from the predicate acts themselves, but under state or perhaps other federal law, not RICO.

Second. If a “racketeer” uses arson and threats to induce honest businessmen to pay protection money, or to purchase certain goods, or to hire certain workers, the targeted businessmen could sue to recover for injury to their business and property resulting from the added costs. This would be so if they were the direct victims of the predicate acts or if they had reacted to offenses committed against other businessmen. In each case, the predicate acts were committed in order to accomplish a certain end — e. g., to induce the prospective plaintiffs to take action to the economic benefit of the racketeer; in each case the result would have taken a toll on the competitive position of the prospective plaintiff by increasing his costs of doing business.

At the same time, the plaintiffs could not recover under RICO for the direct damages from the predicate acts. They could not, for example, recover for the cost of the building burned, or for personal injury resulting from the threat. Indeed, compensation for this latter injury is barred already by RICO’s exclusion of personal injury claims. As in the previous 522*522 example, these injuries are amply protected by state-law damages actions.

Third. If a “racketeer” infiltrates and obtains control of a legitimate business either through fraud, foreclosure on usurious loans, extortion, or acceptance of business interests in payment of gambling debts, the honest investor who is thereby displaced could bring a civil RICO action claiming infiltration injury resulting from the infiltrator’s pattern of predicate acts that enabled him to gain control. Thereafter, if the enterprise conducts its business through a pattern of racketeering activity to enhance its profits or perpetuate its economic power, competitors of that enterprise could bring civil RICO actions alleging injury by reason of the enhanced commercial position the enterprise has obtained from its unlawful acts, and customers forced to purchase from sponsored suppliers could recover their added costs of doing business. At the same time, the direct victims of the activity — for example, customers defrauded by an infiltrated bank — could not recover under civil RICO. The bank does not, of course, thereby escape liability. The customers simply must rely on the existing causes of action, usually under state law.

Alternatively, if the infiltrated enterprise operates a legitimate business to a businessman’s competitive disadvantage because of the enterprise’s strong economic base derived from perpetration of predicate acts, the competitor could bring a civil RICO action alleging injury to his competitive position. The predicate acts then would have enabled the “enterprise” to gain a competitive advantage that brought harm to the plaintiff-competitor. Again, the direct victims of the predicate acts whose profits were invested in the “legitimate enterprise,” would not be able to recover damages under civil RICO for injury resulting from the predicate acts alone.

These examples are not exclusive, and if this formulation were adopted, lower courts would, of course, have the opportunity 523*523 to smooth numerous rough edges. The examples are designed simply to illustrate the type of injury that civil RICO was, to my mind, designed to compensate. The construction I describe offers a powerful remedy to the honest businessmen with whom Congress was concerned, who might have had no recourse against a “racketeer” prior to enactment of the statute. At the same time, this construction avoids both the theoretical and practical problems outlined in Part I. Under this view, traditional state-law claims are not federalized; federal remedial schemes are not inevitably displaced or superseded; and, consequently, ordinary commercial disputes are not misguidedly placed within the scope of civil RICO.[2]

III

The Court today permits two civil actions for treble damages to go forward that are not authorized either by the language and legislative history of the civil RICO statute, or by the policies that underlay passage of that statute. In so doing, the Court shirks its well-recognized responsibility to assure that Congress’ intent is not thwarted by maintenance of unintended litigation, and it does so based on an unfounded and ill-considered reading of a statutory provision. Because I believe the provision at issue is susceptible of a narrower interpretation that comports both with the statutory language and the legislative history, I dissent.

JUSTICE POWELL, dissenting.

I agree with JUSTICE MARSHALL that the Court today reads the civil RICO statute in a way that validates uses of the statute that were never intended by Congress, and I join his dissent. I write separately to emphasize my disagreement 524*524 with the Court’s conclusion that the statute must be applied to authorize the types of private civil actions now being brought frequently against respected businesses to redress ordinary fraud and breach-of-contract cases.[1]

I

In United States v. Turkette, 452 U. S. 576 (1981), the Court noted that in construing the scope of a statute, its language, if unambiguous, must be regarded as conclusive “in the absence of `a clearly expressed legislative intent to the contrary.’ ” Id., at 580 (emphasis added) (quoting Consumer Product Safety Comm’n v. GTE Sylvania, Inc., 447 U. S. 102, 108 (1980)). Accord, Russello v. United States, 464 U. S. 16, 20 (1983). In both Turkette and Russello, we found that the “declared purpose” of Congress in enacting the RICO statute was ” `to seek the eradication of organized crime in the United States.’ ” United States v. Turkette, supra, at 589 (quoting the statement of findings prefacing the Organized Crime Control Act of 1970, Pub. L. 91-452, 84 Stat. 923); accord, Russello v. United States, supra, at 26-27. That organized crime was Congress’ target is apparent from the Act’s title, is made plain throughout the legislative history of the statute, see, e. g., S. Rep. No. 91-617, p. 76 (1969) (S. Rep.), and is acknowledged by all parties to these two cases. Accord, Report of the Ad Hoc Civil RICO Task Force of the ABA Section of Corporation, Banking and Business Law 70-92 (1985) (ABA Report). The legislative history cited by the Court today amply supports this conclusion, see ante, at 487-488, and the Court concedes that “in its private civil version, RICO is evolving into something quite 525*525 different from the original conception of its enactors. See generally ABA Report 55-69.” Ante, at 500. Yet, the Court concludes that it is compelled by the statutory language to construe § 1964(c) to reach garden-variety fraud and breach of contract cases such as those before us today. Ibid.

As the Court of Appeals observed in this case, “[i]f Congress had intended to provide a federal forum for plaintiffs for so many common law wrongs, it would at least have discussed it.”[2] 741 F. 2d 482, 492 (1984). The Court today concludes that Congress was aware of the broad scope of the statute, relying on the fact that some Congressmen objected to the possibility of abuse of the RICO statute by arguing that it could be used “to harass innocent businessmen.” H. R. Rep. No. 91-1549, p. 187 (1970) (dissenting views of Reps. Conyers, Mikva, and Ryan); 116 Cong. Rec. 35342 (1970) (remarks of Rep. Mikva).

In the legislative history of every statute, one may find critics of the bill who predict dire consequences in the event of its enactment. A court need not infer from such statements by opponents that Congress intended those consequences to occur, particularly where, as here, there is compelling evidence to the contrary. The legislative history reveals that Congress did not state explicitly that the statute would reach only members of the Mafia because it believed there were constitutional problems with establishing such a specific status offense. E. g., id., at 35343-35344 (remarks of Rep. Celler); id., at 35344 (remarks of Rep. Poff). Nonetheless, theless, the legislative history makes clear that the statute was intended to be applied to organized crime, and an influential sponsor of the bill emphasized that any effect it had beyond such crime was meant to be only incidental. Id., at 18914 (remarks of Sen. McClellan).

526*526 The ABA study concurs in this view. The ABA Report states:

“In an attempt to ensure the constitutionality of the statute, Congress made the central proscription of the statute the use of a `pattern of racketeering activities’ in connection with an `enterprise,’ rather than merely outlawing membership in the Mafia, La Cosa Nostra, or other organized criminal syndicates. `Racketeering’ was defined to embrace a potpourri of federal and state criminal offenses deemed to be the type of criminal activities frequently engaged in by mobsters, racketeers and other traditional members of `organized crime.’ The `pattern’ element of the statute was designed to limit its application to planned, ongoing, continuing crime as opposed to sporadic, unrelated, isolated criminal episodes. The `enterprise’ element, when coupled with the `pattern’ requirement, was intended by the Congress to keep the reach of RICO focused directly on traditional organized crime and comparable ongoing criminal activities carried out in a structured, organized environment. The reach of the statute beyond traditional mobster and racketeer activity and comparable ongoing structured criminal enterprises, was intended to be incidental, and only to the extent necessary to maintain the constitutionality of a statute aimed primarily at organized crime.” Id., at 71-72 (footnote omitted).

It has turned out in this case that the naysayers’ dire predictions have come true. As the Court notes, ante, at 499, and n. 16, RICO has been interpreted so broadly that it has been used more often against respected businesses with no ties to organized crime, than against the mobsters who were the clearly intended target of the statute. While I acknowledge that the language of the statute may be read as broadly as the Court interprets it today, I do not believe that it must 527*527 be so read. Nor do I believe that interpreting the statutory language more narrowly than the Court does will “eliminate the [civil RICO] private action,” ante, at 499, in cases of the kind clearly identified by the legislative history. The statute may and should be read narrowly to confine its reach to the type of conduct Congress had in mind. It is the duty of this Court to implement the unequivocal intention of Congress.

II

The language of this complex statute is susceptible of being read consistently with this intent. For example, the requirement in the statute of proof of a “pattern” of racketeering activity may be interpreted narrowly. Section 1961(5), defining “pattern of racketeering activity,” states that such a pattern “requires at least two acts of racketeering activity.” This contrasts with the definition of “racketeering activity” in § 1961(1), stating that such activity “means” any of a number of acts. The definition of “pattern” may thus logically be interpreted as meaning that the presence of the predicate acts is only the beginning: something more is required for a “pattern” to be proved. The ABA Report concurs in this view. It argues persuasively that “[t]he `pattern’ element of the statute was designed to limit its application to planned, ongoing, continuing crime as opposed to sporadic, unrelated, isolated criminal episodes,” ABA Report 72, such as the criminal acts alleged in the case before us today.

The legislative history bears out this interpretation of “pattern.” Senator McClellan, a leading sponsor of the bill, stated that “proof of two acts of racketeering activity, without more, does not establish a pattern.” 116 Cong. Rec. 18940 (1970). Likewise, the Senate Report considered the “concept of `pattern’ [to be] essential to the operation of the statute.” S. Rep., at 158. It stated that the bill was not aimed at sporadic activity, but that the “infiltration of legitimate business normally requires more than one `racketeering 528*528 activity’ and the threat of continuing activity to be effective. It is this factor of continuity plus relationship which combines to produce a pattern.” Ibid. (emphasis added). The ABA Report suggests that to effectuate this legislative intent, “pattern” should be interpreted as requiring that (i) the racketeering acts be related to each other, (ii) they be part of some common scheme, and (iii) some sort of continuity between the acts or a threat of continuing criminal activity must be shown. ABA Report, at 193-208. By construing “pattern” to focus on the manner in which the crime was perpetrated, courts could go a long way toward limiting the reach of the statute to its intended target — organized crime.

The Court concedes that “pattern” could be narrowly construed, ante, at 496, n. 14, and notes that part of the reason civil RICO has been put to such extraordinary uses is because of the “failure of Congress and the courts to develop a meaningful concept of `pattern,’ ” ante, at 500. The Court declines to decide whether the defendants’ acts constitute such a pattern in this case, however, because it concludes that that question is not before the Court. Ibid. I agree that the scope of the “pattern” requirement is not included in the questions on which we granted certiorari. I am concerned, however, that in the course of rejecting the Court of Appeals’ ruling that the statute requires proof of a “racketeering injury” the Court has read the entire statute so broadly that it will be difficult, if not impossible, for courts to adopt a reading of “pattern” that will conform to the intention of Congress.

The Court bases its rejection of the “racketeering injury” requirement on the general principles that the RICO statute is to be read “broadly,” that it is to be ” `liberally construed to effectuate its remedial purposes,’ ” ante, at 498 (quoting Pub. L. 91-452, § 904(a), 84 Stat. 947), and that the statute was part of “an aggressive initiative to supplement old remedies and develop new methods for fighting crime.” Ante, at 498. Although the Court acknowledges that few of the legislative statements supporting these principles were made 529*529 with reference to RICO’s private civil action, it concludes nevertheless that all of the Act’s provisions should be read in the “spirit” of these principles. Ibid. By constructing such a broad premise for its rejection of the “racketeering injury” requirement, the Court seems to mandate that all future courts read the entire statute broadly.

It is neither necessary to the Court’s decision, nor in my view correct, to read the civil RICO provisions so expansively. We ruled in Turkette and Russello that the statute must be read broadly and construed liberally to effectuate its remedial purposes, but like the legislative history to which the Court alludes, it is clear we were referring there to RICO’s criminal provisions. It does not necessarily follow that the same principles apply to RICO’s private civil provisions. The Senate Report recognized a difference between criminal and civil enforcement in describing proposed civil remedies that would have been available to the Government. It emphasized that although those proposed remedies were intended to place additional pressure on organized crime, they were intended to reach “essentially an economic, not a punitive goal.” S. Rep., at 81 (emphasis added). The Report elaborated as follows:

“However remedies may be fashioned, it is necessary to free the channels of commerce from predatory activities, but there is no intent to visit punishment on any individual; the purpose is civil. Punishment as such is limited to the criminal remedies . . . .” Ibid. (emphasis added; footnote omitted).

The reference in the Report to “predatory activities” was to organized crime. Only a small fraction of the scores of civil RICO cases now being brought implicate organized crime in any way.[3] Typically, these suits are being brought — in the 530*530 unfettered discretion of private litigants — in federal court against legitimate businesses seeking treble damages in ordinary fraud and contract cases. There is nothing comparable in those cases to the restraint on the institution of criminal suits exercised by Government prosecutorial discretion. Today’s opinion inevitably will encourage continued expansion of resort to RICO in cases of alleged fraud or contract violation rather than to the traditional remedies available in state court. As the Court of Appeals emphasized, it defies rational belief, particularly in light of the legislative history, that Congress intended this far-reaching result. Accordingly, I dissent.

[*] Briefs of amici curiae urging reversal were filed for the State of Arizona et al. by the Attorneys General for their respective States as follows: Robert K. Corbin of Arizona, Norman C. Gorsuch of Alaska, John Van de Kamp of California, Duane Woodard of Colorado, Joseph Lieberman of Connecticut, Jim Smith of Florida, Michael Lilly of Hawaii, Jim Jones of Idaho, Neil Hartigan of Illinios, Linley E. Pearson of Indiana, David L. Armstrong of Kentucky, William J. Guste, Jr., of Louisiana, Frank J. Kelley of Michigan, Edward L. Pittman of Mississippi, William L. Webster of Missouri, Mike Greely of Montana, Brian McKay of Nevada, Irwin L. Kimmelman of New Jersey, Paul Bardacke of New Mexico, Lacy H. Thornburg of North Carolina, Nicholas J. Spaeth of North Dakota, Anthony Celebrezze of Ohio, Michael Turpen of Oklahoma, David Fronmayer of Oregon, Dennis J. Roberts II of Rhode Island, T. Travis Medlock of South Carolina, Mark V. Meierhenry of South Dakota, W. J. Michael Cody of Tennessee, David L. Wilkinson of Utah, John J. Easton of Vermont, Kenneth O. Eikenberry of Washington, Charlie Brown of West Virginia, Bronson C. La Follette of Wisconsin, Archie G. McClintock of Wyoming; for the State of New York by Robert Abrams, Attorney General, and Robert Hermann, Solicitor General; for the City of New York et al. by Frederick A. O. Schwarz, Jr., James D. Montgomery, and Barbara W. Mather; and for the County of Suffolk, New York, by Mark D. Cohen.

Briefs of amici curiae urging affirmance were filed for the Alliance of American Insurers et al. by James F. Fitzpatrick and John M. Quinn; for the American Institute of Certified Public Accountants by Philip A. Lacovara, Jay Kelly Wright, Kenneth J. Bialkin, and Louis A. Craco; and for the Securities Industry Association by Joel W. Sternman, Eugene A. Gaer, and William J. Fitzpatrick.

[1] Of 270 District Court RICO decisions prior to this year, only 3% (nine cases) were decided throughout the 1970’s, 2% were decided in 1980, 7% in 1981, 13% in 1982, 33% in 1983, and 43% in 1984. Report of the Ad Hoc Civil RICO Task Force of the ABA Section of Corporation, Banking and Business Law 55 (1985) (hereinafter ABA Report); see also id., at 53a (table).

[2] For a thorough bibliography of civil RICO decisions and commentary, see Milner, A Civil RICO Bibliography, 21 C. W. L. R. 409 (1985).

[3] RICO defines “racketeering activity” to mean

“(A) any act or threat involving murder, kidnaping, gambling, arson, robbery, bribery, extortion, or dealing in narcotic or other dangerous drugs, which is chargeable under State law and punishable by imprisonment for more than one year; (B) any act which is indictable under any of the following provisions of title 18, United States Code: Section 201 (relating to bribery), section 224 (relating to sports bribery), sections 471, 472, and 473 (relating to counterfeiting), section 659 (relating to theft from interstate shipment) if the act indictable under section 659 is felonious, section 664 (relating to embezzlement from pension and welfare funds), sections 891-894 (relating to extortionate credit transactions), section 1084 (relating to the transmission of gambling information), section 1341 (relating to mail fraud), section 1343 (relating to wire fraud), section 1503 (relating to obstruction of justice), section 1510 (relating to obstruction of criminal investigations), section 1511 (relating to the obstruction of State or local law enforcement), section 1951 (relating to interference with commerce, robbery, or extortion), section 1952 (relating to racketeering), section 1953 (relating to interstate transportation of wagering paraphernalia), section 1954 (relating to unlawful welfare fund payments), section 1955 (relating to the prohibition of illegal gambling businesses), sections 2312 and 2313 (relating to interstate transportation of stolen motor vehicles), sections 2314 and 2315 (relating to interstate transportation of stolen property), section 2320 (relating to trafficking in certain motor vehicles or motor vehicle parts), sections 2341-2346 (relating to trafficking in contraband cigarettes), sections 2421-2424 (relating to white slave traffic), (C) any act which is indictable under title 29, United States Code, section 186 (dealing with restrictions on payments and loans to labor organizations) or section 501(c) (relating to embezzlement from union funds), (D) any offense involving fraud connected with a case under title 11, fraud in the sale of securities, or the felonious manufacture, importation, receiving, concealment, buying, selling, or otherwise dealing in narcotic or other dangerous drugs, punishable under any law of the United States, or (E) any act which is indictable under the Currency and Foreign Transactions Reporting Act.” 18 U. S. C. § 1961(1) (1982 ed., Supp. III).

[4] In relevant part, 18 U. S. C. § 1962 provides:

“(a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt . . . to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. . . .

“(b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.

“(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.

“(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsections (a), (b), or (c) of this section.”

[5] The day after the decision in this case, another divided panel of the Second Circuit reached a similar conclusion. Bankers Trust Co. v. Rhoades, 741 F. 2d 511 (1984), cert. pending, No. 84-657. It held that § 1964(c) allowed recovery only for injuries resulting not from the predicate acts, but from the fact that they were part of a pattern. “If a plaintiff’s injury is that caused by the predicate acts themselves, he is injured regardless of whether or not there is a pattern; hence he cannot be said to be injured by the pattern,” and cannot recover. Id., at 517 (emphasis in original).

The following day, a third panel of the same Circuit, this time unanimous, decided Furman v. Cirrito, 741 F. 2d 524 (1984), cert. pending, No. 84-604. In that case, the District Court had dismissed the complaint for failure to allege a distinct racketeering injury. The Court of Appeals affirmed, relying on the opinions in Sedima and Bankers Trust, but wrote at some length to record its disagreement with those decisions. The panel would have required no injury beyond that resulting from the predicate acts.

[6] A month after the trio of Second Circuit opinions was released, the Eighth Circuit decided Alexander Grant & Co. v. Tiffany Industries, Inc., 742 F. 2d 408 (1984), cert. pending, Nos. 84-1084, 84-1222. Viewing its decision as contrary to Sedima but consistent with, though broader than, Bankers Trust, the court held that a RICO claim does require some unspecified element beyond the injury flowing directly from the predicate acts. At the same time, it stood by a prior decision that had rejected any requirement that the injury be solely commercial or competitive, or that the defendants be involved in organized crime. 742 F. 2d, at 413; see Bennett v. Berg, 685 F. 2d 1053, 1058-1059, 1063-1064 (CA8 1982), aff’d in part and rev’d in part, 710 F. 2d 1361 (en banc), cert. denied, 464 U. S. 1008 (1983).

Two months later, the Seventh Circuit decided Haroco, Inc. v. American National Bank & Trust Co. of Chicago, 747 F. 2d 384 (1984), aff’d, post, p. 606. Dismissing Sedima as the resurrection of the discredited requirement of an organized crime nexus, and Bankers Trust as an emasculation of the treble-damages remedy, the Seventh Circuit rejected “the elusive racketeering injury requirement.” 747 F. 2d, at 394, 398-399. The Fifth Circuit had taken a similar position. Alcorn County v. U. S. Interstate Supplies, Inc., 731 F. 2d 1160, 1169 (1984).

The requirement of a prior RICO conviction was rejected in Bunker Ramo Corp. v. United Business Forms, Inc., 713 F. 2d 1272, 1286-1287 (CA7 1983), and USACO Coal Co. v. Carbomin Energy, Inc., 689 F. 2d 94 (CA6 1982). See also United States v. Cappetto, 502 F. 2d 1351 (CA7 1974), cert. denied, 420 U. S. 925 (1975) (civil action by Government).

[7] When Congress intended that the defendant have been previously convicted, it said so. Title 18 U. S. C. § 1963(f) (1982 ed., Supp. III) states that “[u]pon conviction of a person under this section,” his forfeited property shall be seized. Likewise, in Title X of the same legislation Congress explicitly required prior convictions, rather than prior criminal activity, to support enhanced sentences for special offenders. See 18 U. S. C. § 3575(e).

[8] The court below considered it significant that § 1964(c) requires a “violation of section 1962,” whereas the Clayton Act speaks of “anything forbidden in the antitrust laws.” 741 F. 2d, at 488; see 15 U. S. C. § 15(a). The court viewed this as a deliberate change indicating Congress’ desire that the underlying conduct not only be forbidden, but also have led to a criminal conviction. There is nothing in the legislative history to support this interpretation, and we cannot view this minor departure in wording, without more, to indicate a fundamental departure in meaning. Representative Steiger, who proposed this wording in the House, nowhere indicated a desire to depart from the antitrust model in this regard. See 116 Cong. Rec. 35227, 35246 (1970). To the contrary, he viewed the treble-damages provision as a “parallel private remedy.” Id., at 27739 (letter to House Judiciary Committee). Likewise, Senator Hruska’s discussion of his identically worded proposal gives no hint of any such intent. See 115 Cong. Rec. 6993 (1969). In any event, the change in language does not support the court’s drastic inference. It seems more likely that the language was chosen because it is more succinct than that in the Clayton Act, and is consistent with the neighboring provisions. See §§ 1963(a), 1964(a).

[9] It is worth bearing in mind that the holding of the court below is not without problematic consequences of its own. It arbitrarily restricts the availability of private actions, for lawbreakers are often not apprehended and convicted. Even if a conviction has been obtained, it is unlikely that a private plaintiff will be able to recover for all of the acts constituting an extensive “pattern,” or that multiple victims will all be able to obtain redress. This is because criminal convictions are often limited to a small portion of the actual or possible charges. The decision below would also create peculiar incentives for plea bargaining to non-predicate-act offenses so as to ensure immunity from a later civil suit. If nothing else, a criminal defendant might plead to a tiny fraction of counts, so as to limit future civil liability. In addition, the dependence of potential civil litigants on the initiation and success of a criminal prosecution could lead to unhealthy private pressures on prosecutors and to self-serving trial testimony, or at least accusations thereof. Problems would also arise if some or all of the convictions were reversed on appeal. Finally, the compelled wait for the completion of criminal proceedings would result in pursuit of stale claims, complex statute of limitations problems, or the wasteful splitting of actions, with resultant claim and issue preclusion complications.

[10] The Court of Appeals also observed that allowing civil suits without prior convictions “would make a hash” of the statute’s liberal-construction requirement. 741 F. 2d, at 502; see RICO § 904(a). Since criminal statutes must be strictly construed, the court reasoned, allowing liberal construction of RICO — an approach often justified on the ground that the conduct for which liability is imposed is “already criminal” — would only be permissible if there already existed criminal convictions. Again, we have doubts about the premise of this rather convoluted argument. The strict-construction principle is merely a guide to statutory interpretation. Like its identical twin, the “rule of lenity,” it “only serves as an aid for resolving an ambiguity; it is not to be used to beget one.” Callanan v. United States, 364 U. S. 587, 596 (1961); see also United States v. Turkette, 452 U. S. 576, 587-588 (1981). But even if that principle has some application, it does not support the court’s holding. The strict- and liberal-construction principles are not mutually exclusive; § 1961 and § 1962 can be strictly construed without adopting that approach to § 1964(c). Cf. United States v. United States Gypsum Co., 438 U. S. 422, 443, n. 19 (1978). Indeed, if Congress’ liberal-construction mandate is to be applied anywhere, it is in § 1964, where RICO’s remedial purposes are most evident.

[11] Even were the constitutional questions more significant, any doubts would be insufficient to overcome the mandate of the statute’s language and history. “Statutes should be construed to avoid constitutional questions, but this interpretative canon is not a license for the judiciary to rewrite language enacted by the legislature.” United States v. Albertini, 472 U. S. 675, 680 (1985).

[12] The decision below does not appear identical to Bankers Trust. It established a standing requirement, whereas Bankers Trust adopted a limitation on damages. The one focused on the mobster element, the other took a more conceptual approach, distinguishing injury caused by the individual acts from injury caused by their cumulative effect. Thus, the Eighth Circuit has indicated its agreement with Bankers Trust but not Sedima. Alexander Grant & Co. v. Tiffany Industries, Inc., 742 F. 2d, at 413. See also Haroco, Inc. v. American National Bank & Trust Co. of Chicago, 747 F. 2d, at 396. The two tests were described as “very different” by the ABA Task Force. See ABA Report, at 310.

Yet the Bankers Trust court itself did not seem to think it was departing from Sedima, see 741 F. 2d, at 516-517, and other Second Circuit panels have treated the two decisions as consistent, see Furman v. Cirrito, 741 F. 2d 524 (1984), cert. pending, No. 84-604; Durante Brothers & Sons, Inc. v. Flushing National Bank, 755 F. 2d 239, 246 (1985). The evident difficulty in discerning just what the racketeering injury requirement consists of would make it rather hard to apply in practice or explain to a jury.

[13] Given the plain words of the statute, we cannot agree with the court below that Congress could have had no “inkling of [§ 1964(c)’s] implications.” 741 F. 2d, at 492. Congress’ “inklings” are best determined by the statutory language that it chooses, and the language it chose here extends far beyond the limits drawn by the Court of Appeals. Nor does the “clanging silence” of the legislative history, ibid., justify those limits. For one thing, § 1964(c) did not pass through Congress unnoticed. See Part II, supra. In addition, congressional silence, no matter how “clanging,” cannot override the words of the statute.

[14] As many commentators have pointed out, the definition of a “pattern of racketeering activity” differs from the other provisions in § 1961 in that it states that a pattern “requires at least two acts of racketeering activity,” § 1961(5) (emphasis added), not that it “means” two such acts. The implication is that while two acts are necessary, they may not be sufficient. Indeed, in common parlance two of anything do not generally form a “pattern.” The legislative history supports the view that two isolated acts of racketeering activity do not constitute a pattern. As the Senate Report explained: “The target of [RICO] is thus not sporadic activity. The infiltration of legitimate business normally requires more than one `racketeering activity’ and the threat of continuing activity to be effective. It is this factor of continuity plus relationship which combines to produce a pattern.” S. Rep. No. 91-617, p. 158 (1969) (emphasis added). Similarly, the sponsor of the Senate bill, after quoting this portion of the Report, pointed out to his colleagues that “[t]he term `pattern’ itself requires the showing of a relationship . . . . So, therefore, proof of two acts of racketeering activity, without more, does not establish a pattern . . . .” 116 Cong. Rec. 18940 (1970) (statement of Sen. McClellan). See also id., at 35193 (statement of Rep. Poff) (RICO “not aimed at the isolated offender”); House Hearings, at 665. Significantly, in defining “pattern” in a later provision of the same bill, Congress was more enlightening: “[C]riminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.” 18 U. S. C. § 3575(e). This language may be useful in interpreting other sections of the Act. Cf. Iannelli v. United States, 420 U. S. 770, 789 (1975).

[15] Such damages include, but are not limited to, the sort of competitive injury for which the dissenters would allow recovery. See post, at 521-522. Under the dissent’s reading of the statute, the harm proximately caused by the forbidden conduct is not compensable, but that ultimately and indirectly flowing therefrom is. We reject this topsy-turvy approach, finding no warrant in the language or the history of the statute for denying recovery thereunder to “the direct victims of the [racketeering] activity,” post, at 522, while preserving it for the indirect. Even the court below was not that grudging. It would apparently have allowed recovery for both the direct and the ultimate harm flowing from the defendant’s conduct, requiring injury “not simply caused by the predicate acts, but also caused by an activity which RICO was designed to deter.” 741 F. 2d, at 496 (emphasis added).

The dissent would also go further than did the Second Circuit in its requirement that the plaintiff have suffered a competitive injury. Again, as the court below stated, Congress “nowhere suggested that actual anti-competitive effect is required for suits under the statute.” Ibid. The language it chose, allowing recovery to “[a]ny person injured in his business or property,” § 1964(c) (emphasis added), applied to this situation, suggests that the statute is not so limited.

[16] The ABA Task Force found that of the 270 known civil RICO cases at the trial court level, 40% involved securities fraud, 37% common-law fraud in a commercial or business setting, and only 9% “allegations of criminal activity of a type generally associated with professional criminals.” ABA Report, at 55-56. Another survey of 132 published decisions found that 57 involved securities transactions and 38 commercial and contract disputes, while no other category made it into double figures. American Institute of Certified Public Accountants, The Authority to Bring Private Treble-Damage Suits Under “RICO” Should be Removed 13 (Oct. 10, 1984).

[*] [This opinion applies also to No. 84-822, American National Bank & Trust Company of Chicago et al. v. Haroco, Inc., et al, post, p. 606.]

[1] Section 1964(c) provides:

“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 court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee.”

Section 4 of the Clayton Act, 15 U. S. C. § 15, provides in relevant part:

“[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover three-fold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.”

[2] The analysis in my dissent would lead to the dismissal of the civil RICO claims at stake here. I thus do not need to decide whether a civil RICO action can proceed only after a criminal conviction. See ante, at 488-493.

[1] The Court says these suits are not being brought against the “archetypal, intimidating mobster” because of a “defect” that is “inherent in the statute.” Ante, at 499. If RICO must be construed as the Court holds, this is indeed a defect that Congress never intended. I do not believe that the statute must be construed in what in effect is an irrational manner.

[2] The force of this observation is accented by RICO’s provision for treble damages — an enticing invitation to litigate these claims in federal courts.

[3] As noted in the ABA Report, of the 270 District Court RICO decisions prior to this year, only 3% (9cases) were decided throughout the entire decade of the 1970’s, whereas 43% (116 cases) were decided in 1984. ABA Report, at 53a (Table). See ante, at 481, n. 1.