Court Affirms Dismissal of Civil RICO Finding No ‘Direct Injury;” Court Does Not Consider Supreme Court Decision in Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 661 (2008)

Ozeran v. Robin Jacobs DBA Law Office of Robin Jacobs Inc., __ Fed. Appx. ___, 2020 WL 777646 (9th Circ., Feb. 18, 2020)

Plaintiff Robert Ozeran appealed the district court’s decision dismissing with prejudice his claims under RICO, and other claims.

Ozeran’s RICO claim was based on the theory that, as a workers’ compensation attorney competing in the same geographic market as the attorney Defendants, he was injured by Defendants’ operation of an unlawful referral scheme under which Defendants would pay “cappers” a monthly fee in exchange for the referral of “an agreed upon minimum number of retained clients per month.” This scheme, according to Ozeran, constituted an enterprise that, together with other related enterprises, was operated by Defendants through a pattern of mail and wire fraud.

The court concluded could not satisfy the proximate causation standards for civil RICO claims.

In order to establish proximate causation, a civil RICO plaintiff must plead and prove that there is “ ‘some direct relation between the injury asserted and the injurious conduct alleged.’ ” citing Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 457, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006) (emphasis added) (finding the plaintiffs claim was too indirect to establish proximate causation. Id. at 456–61, 126 S.Ct. 1991. As the Court explained, the state was the direct victim of the predicate acts of mail and wire fraud, and the plaintiff competitor was injured only indirectly by virtue of the collateral impact of the defendants’ sales-tax cheating on the steel-supply market. Id. at 460–61, 126 S.Ct. 1991. The fact that the defendant carried out the scheme in order to injure the plaintiff did not cure the lack of a direct connection between the alleged RICO violation and the plaintiff’s injuries: “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.” Id. at 460, 126 S.Ct. 1991.

Ozeran’s RICO claim failed as a matter of law under Anza.  Ozeran does not, and could not, contend that he was the direct victim of the alleged predicate acts of mail and wire fraud on which his RICO claim is based; rather, the direct victims of those fraudulent acts were the recruited clients and the insurance companies from whom the capping scheme was hidden.  The court stated that like the plaintiff in Anza, Ozeran cannot avoid his inability to allege proximate causation by alleging that Defendants’ “aim was to increase market share at a competitor’s expense.” Anza, 547 U.S. at 460, 126 S.Ct. 1991.

Ed Note:   The Ninth Circuit did not consider the more recent Supreme Court decision in Bridge which could serve as a basis for reversal the dismissal of the complaint. In Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 645, 661 (2008),  unlike in Anza and Hemi Group, where other parties suffered more direct injuries than the plaintiffs, in Bridge, the county—which sold tax liens at prices not dependent on who was the buyer—was not injured. Id. at 658. Rather, the plaintiffs were the immediate victims of the defendants’ fraud and were best situated to sue the defendants. Id. Thus, the Supreme Court held that the plaintiffs had sufficiently alleged proximate cause under RICO. Id. at 661, 128 S.Ct. 2131.

Accordingly, the direct link between the RICO violations and the injury asserted can be met under Bridge when it is foreseeable the scheme would cause plaintiffs injury.


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