Eighth Circuit Affirms District Court’s Granting of Class Certification for Civil RICO Claims

Custom Hair Designs by Sandy v. Central Payment Co., LLC, __F.3d__, 2020 WL 7755459 (8th Cir., Dec. 30, 2020)

The Court affirmed the lower court’s motion for certification of plaintiff class brought on behalf of more than 160,000 small retailers that used the defendant’s credit card processing services, seeking to recover on breach of contract, fraudulent concealment, and civil racketeering theories for defendant’s alleged misrepresentation of its fees, multiplication of fees, and inflation of fees without prior approval from issuing banks.


Regarding the civil RICO claims, the court addressed standing.  The court referred to the Supreme Court which stated that “[A] plaintiff asserting a RICO claim predicated on mail fraud need not show, either as an element of its claim or as a prerequisite to establishing proximate causation, that it relied on the defendant’s alleged misrepresentations.” Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 661 (2008). “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.” Id. at 654, 128 S.Ct. 2131quoting Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006).

The Court stated there is no basis that the proximate-cause analysis under RICO must precisely track the proximate-cause analysis of a common-law fraud claim.” Id. at 655, 128 S.Ct. 2131Compare In re United States Foodservice Inc. Pricing Litig., 729 F.3d 108, 121-22 (2d Cir. 2013) (affirming RICO certification in pricing case) and Torres v. S.G.E. Mgmt., LLC, 838 F.3d 629, 639 (5th Cir. 2016) (en banc) (post-Bridge case certifying RICO class), with pre-Bridge cases.

The court found that defendant CPAY’s arguments about reliance were mistaken. Although reliance is required for common law fraud, RICO’s predicate is mail or wire fraud, which did not exist at common law. Bridge, 553 U.S. at 652, 128 S.Ct. 2131. The requirements for common law fraud are not read into RICO. Id.  Thus, plaintiffs are correct that overpayments from a pattern of systemic mail fraud in CPAY’s billing would satisfy RICO’s causation requirements and be common among all plaintiffs. See In re Foodservice, 729 F.3d at 122 (holding fees “created for the purpose of misrepresenting cost and … then kept secret so as to deceive customers about overbilling” was a question amenable to common proof).

Ed Note:   This is a good case to catalogue circuit cases pertaining to class certifications of civil RICO actions.

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