Court Affirmed Denial of Motion for Leave to Add Civil RICO Allegations Finding Insufficient Proximate Causation 

Laydon v. Cooperative Robobank, U.A., 2022 WL 17491341, ___4th __, 2d Cir. Dec. 8, 2022)

Plaintiff Jeffrey Laydon brought this putative class action against more than twenty banks and brokers, alleging a conspiracy to manipulate two benchmark rates known as Yen-LIBOR and Euroyen TIBOR. He claimed that he was injured after purchasing and trading a Euroyen TIBOR futures contract on a U.S.-based commodity exchange because the value of that contract was based on a distorted, artificial Euroyen TIBOR. Plaintiff brought claims under the Commodity Exchange Act (“CEA”), 7 U.S.C. § 1 et seq., and the Sherman Antitrust Act, 15 U.S.C. § 1 et seq., and sought leave to assert claims under RICO”), 18 U.S.C. §§ 19621964(c).

The district court (Daniels, J.) dismissed the CEA and antitrust claims and denied leave to add the RICO claims. The Court affirmed.  The alleged conduct—i.e., that the bank defendants presented fraudulent submissions to an organization based in London that set a benchmark rate related to a foreign currency—occurred almost entirely overseas. Indeed, Plaintiff failed to allege any significant acts that took place in the United States. Plaintiff’s CEA claims are based predominantly on foreign conduct and are thus impermissibly extraterritorial. See Prime Int’l Trading, Ltd. v. BP P.L.C., 937 F.3d 94, 106 (2d Cir. 2019).

The court agreed with the district court that Plaintiff failed to allege proximate causation for his RICO claims.. To establish a RICO claim, a plaintiff must show: (1) a violation of the RICO statute, 18 U.S.C. § 1962; (2) an injury to business or property; and (3) that the injury was caused by the violation of [§] 1962.” Cruz v. FXDirectDealer, LLC, 720 F.3d 115, 120 (2d Cir. 2013) (citation omitted). As for this last requirement, “a plaintiff must … establish that the underlying § 1962 RICO violation was the proximate cause of his injury.” Empire Merchs., LLC v. Reliable Churchill LLLP, 902 F.3d 132, 140 (2d Cir. 2018) (cleaned up). “[T]he central question … is whether the alleged violation led directly to the plaintiff’s injuries.” Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006). As with proximate causation in the antitrust context, we “rarely ‘go beyond the first step’ ” in the causal chain. Empire Merchs., LLC, 902 F.3d at 141 (citation omitted); see also Anza, 547 U.S. at 459–60, 126 S.Ct. 1991 (looking to the directness of injury, “speculative nature of the proceedings,” risk of duplicative recoveries, and existence of more immediate victims when analyzing proximate causation in the civil RICO context).

Plaintiff failed to allege that his proposed RICO claims, premised on wire fraud, see 18 U.S.C. § 1343, proximately caused his injury. Plaintiff’s alleged injury did not flow directly from the first step in the causal chain. Not only did Plaintiff fail to allege any direct dealings with Defendants, but his asserted injury (a change in the value of his domestically traded Euroyen TIBOR futures contract) is several steps removed from Defendants’ alleged conduct (sending fraudulent Yen-LIBOR submissions to the BBA).  Plaintiff thus cannot establish proximate causation for purposes of his RICO claims for the same reason that he failed to do so for his antitrust claim.


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