Second Circuit Affirms Dismissal of Civil RICO Finding Insufficient Continuity When Plaintiff Alleges Multiple Racketeering Acts Pursuant to a Single Discreet Scheme to Defraud

Liang v. Home Reno Concepts, LLC, __ Fed. Appx. ___, 2020 WL 747941 (2d Cir., Feb. 14, 2020)

The Court dismissed Plaintiffs second amended complaint which alleged civil RICO violations.  Defendants’ company, Home Reno, although it marketed itself as “fully licensed and insured,” was never actually licensed to provide home renovation services in either New York City or Nassau County, nor was it “fully … insured.”

In July 2016, after viewing Home Reno’s website and speaking with Home Reno owners, Liang hired Home Reno to renovate her home’s flooring, lighting, and upstairs bathroom and install a new heating system. The renovation projects were not successful and the heating system was never activated. When Liang called Home Reno to ask if someone could turn on the system, she was told that she still had an unpaid balance, which was not true, and that Home Reno would only send someone if she paid additional money. The other renovations were also not satisfactory. Liang and her family ultimately paid someone else to redo the work.

The Complaint alleged mail fraud and wire fraud in the form of false and misleading statements posted on defendants’ website, Yelp.com, and print advertisements, and extortion in defendants’ demanding of additional payment for turning on Liang’s home heating system. The district court dismissed Liang’s mail and wire fraud claims for a failure to allege fraudulent intent, and Liang’s extortion claim because a single act cannot constitute a pattern under RICO § 1962(c),

The Court affirmed the dismissal of Liang’s RICO claims because the conduct at issue, while arguably fraudulent (defendants represented they were fully licensed and insured when they were not), did not constitute “a pattern of racketeering activity.”  The Court relied on an earlier decision, Schlaifer Nance & Co. v. Estate of Warhol, 119 F.3d 91, 97 (2d Cir. 1997) where the court affirmed the dismissal of the RICO claim for lack of continuity — there was only “one purportedly fraudulent act: the negotiation of the [licensing] Agreement.” 119 F.3d at 98.

Here, the allegations in the Complaint likewise arose from a single act — Liang’s contracting with defendants to perform home renovation services. The court found Liang’s attempt to stretch this sole act into seven discreet acts, which she contends include defendants’ statements on their website, Yelp.com page, and print newsletter, as well as their sending her an email demanding an “invalid payment,” unavailing.  The Court stated that “courts must take care to ensure that the plaintiff is not artificially fragmenting a singular act into multiple acts simply to invoke RICO.” 119 F.3d at 98. In this case, Liang’s allegations stemmed from a single, allegedly fraudulent act and could not form the basis for a civil RICO claim.

Ed Note:   This case would likely fail closed-ended continuity for multiple reasons, e.g., lack of multiple victims, lack of amount of time the fraud existed etc.  But is noteworthy the Court is following the position of the Department of Justice which states that multiple individual mailings, wirings, and demands in furtherance of a “single discrete scheme” to defraud one victim is not sufficient to constitute multiple racketeering acts.   This does conflict with H.J. Inc. as written which does not require multiple schemes to show continuity.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s