Court Addresses When “Litigation Expenses” Constitutes RICO Injury

Sasmor v. Meisels, __ Fed. Appx. ___, 2017 WL 395768 (2d Cir., Sept. 8, 2017)

The Second Circuit affirmed the District Court’s grant of summary judgment concluding that Sasmor’s civil RICO claims failed because he failed to demonstrate that he suffered a cognizable RICO injury.

Sasmor contended that he suffered two RICO injuries: first, he asserted that he made a rental payment in May 2010 because of Defendants’ acts of wire fraud, mail fraud, and extortion; second, he asserts that he incurred litigation expenses during the eviction proceedings that Defendants pursued against him, and that those proceedings (and thus, the related expenses) resulted from Defendants’ acts of mail fraud and extortion.

Regarding the first alleged injury, Sasmor argued that his rental payment in May 2010 was an injury caused by a RICO violation when he “would not have moved in or paid any money” if Defendants had not misrepresented that his room was “legitimate, legal housing”—a misrepresentation that Sasmor argues constitutes “wire fraud.” But, Sasmor did not present any evidence suggesting that he would have paid lower rent, however, had Defendants not misrepresented the legal status of the room and, as a result, he had chosen to live elsewhere.

Regarding the second injury, similarly, the court found the record did not support the existence of a causal link between any alleged RICO predicate act and Sasmor’s litigation expenses. He argues that the eviction proceedings against him in state court constituted mail fraud and extortion, pointing primarily to the success of his technical defense during those proceedings. But, Sasmor did not present evidence sufficient to transform Defendants’ assertion of a losing legal position in state court into mail fraud or extortion. These “misrepresentations” during the eviction proceedings are no more than litigation positions taken on legal questions. Thus, the record did not support an inference that Defendants’ design was to defraud Sasmor by taking incorrect legal positions during eviction proceedings pursued by them when he refused to pay rent or vacate the premises.

Nor did Sasmor present evidence sufficient to establish that the very act of pursuing the eviction proceedings amounted to extortion stating improperly brought litigation without more, however, does not constitute the kind of “wrongful use of force” required for the offense of extortion. See, e.g., Deck v. Engineered Laminates, 349 F.3d 1253, 1257–58 (10th Cir. 2003) (“[M]eritless litigation is not extortion under § 1951.”) (collecting cases holding same). Accordingly, Sasmor did not incur these litigation expenses as a result of a RICO violation and in this respect, too, Sasmor has not shown that he suffered a RICO injury.

David J. Stander is a civil RICO Attorney who focuses on civil RICO litigation and consulting.

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