When Refiling a Civil RICO Claim After Dismissal Without Prejudice, Plaintiff Must Still Refile Within the Applicable Limitations Period

Crowe v. Servin, 2018 WL 555446 (10th Cir., Jan. 25, 2018)

The Tenth Circuit affirmed the lower court’s dismissal of Plaintiff’s second RICO action against the same defendants concluding that Crowe’s claims were time-barred. The district court discussed that statute of limitations for civil RICO claims is four years from either the discovery of the injury or the date the injury occurred. The district court reasoned that Crowe must have discovered her injury no later than May 2011, when she filed her first RICO action against these defendants. So it concluded that the claims in this case—filed more than six years later—fell well outside the four-year statute of limitations.

Crowe, who was imprisoned during that six year time period, argued for equitable tolling. But the district court concluded that she hadn’t shown (1) that she’d been affirmatively misled by the court or (2) that any other grounds for equitable tolling existed. Since Crowe’s challenge to the district court’s decision focused entirely on the equitable-tolling question, the Court reviewed a “district court’s refusal to apply equitable tolling for an abuse of discretion.”

The Court discussed that a litigant seeking equitable tolling must show “(1) that [s]he has been pursuing [her] rights diligently, and (2) that some extraordinary circumstances stood in [her] way.”. A litigant can satisfy the extraordinary-circumstances requirement by demonstrating that a district court affirmatively misled him or her by, for example, providing the litigant with inaccurate instructions. The district court concluded that Crowe’s incarceration didn’t excuse her failure to prosecute.

Nor did the district court direct Crowe to refile at a later time simply by dismissing the case without prejudice. A dismissal without prejudice just means that the plaintiff isn’t barred “from refiling the lawsuit within the applicable limitations period.” Dismissal, Black’s Law Dictionary (10th ed. 2014) (emphasis added). It doesn’t absolve Crowe of the legal requirement of filing within the applicable statute of limitations. Cf. AdvantEdge Bus. Grp. v. Thomas E. Mestmaker & Assocs., Inc., 552 F.3d 1233, 1236 (10th Cir. 2009) (“This court has recognized that a dismissal without prejudice can have the practical effect of a dismissal with prejudice if the statute of limitations has expired.”).

The Court concluded that Crowe hasn’t shown that the district court affirmatively misled her. Nor has she either argued or shown (1) that she has diligently pursued her rights or (2) that other extraordinary circumstances stood in her way. Instead, more than four years elapsed between the date on which the district court dismissed her initial claims and the date on which she filed the instant complaint. And while she was incarcerated for much of that time, there’s nothing extraordinary about litigating from prison; on the contrary, courts routinely process cases brought by prisoners. Thus, the district court didn’t abuse its discretion in refusing to equitably toll the statute of limitations.

Ed Note: Since many civil RICO cases are dismissed without prejudice, the civil RICO plaintiff must be aware the Statute of Limitations continues to run and can bar a subsequent Second Amended Complaint, or subsequent Complaint.



Dismissed Civil RICO with State Court Claims Must Be Without Prejudice To Allow Refiling in State Court

Vibe-Macro v. Shabanets, 878 F.3d 1291 (11th Cir., 2018)

The court held that the district court did not abuse its discretion in dismissing with prejudice federal civil RICO claims in amended complaint on shotgun pleading grounds, but in dismissing amended complaint on shotgun pleading grounds, District Court should have dismissed state law claims without prejudice as to refiling in state court.

The Court held that when all federal claims are dismissed before trial, a district court should typically dismiss the pendant state claims as well. Id., at 1296, citing cases stating “that in the usual case in which all federal-law claims are eliminated before trial, the balance of factors to be considered under the pendant jurisdiction doctrine—judicial economy, convenience, fairness, and comity—will point toward declining to exercise jurisdiction over the remaining state-law claims.”

Although it is possible for the district court to continue to exercise supplemental jurisdiction over these pendant claims, if the district court instead chooses to dismiss the state law claims, it usually should do so without prejudice as to refiling in state court, particularly where, as here, the dismissal occurs without any analysis of the merits of the state claims. Therefore, the Court remanded for the limited purpose of clarifying the order in this respect.

The Court further held that the Plaintiff was not entitled to another chance to replead. The district court sua sponte gave him an opportunity to correct the shotgun pleading issues in his complaint, and provided him with specific instructions on how to properly do so. Therefore, although the Court remanded for the limited purpose of clarifying that the dismissal of the state law claims is without prejudice as to refiling in state court, the Court affirmed on all other issues. Id., at 1297.

Ed Note: This is consistent with the law regarding tolling- the Supreme Court has held that to prevent the limitations period on those claims from expiring while they are pending in federal court, section 1367(d) requires state courts to toll the period while a supplemental claim is pending in federal court and for 30 days after its dismissal unless state law provides for a longer tolling period. Jinks v. Richland County, S.C., 538 U.S. 456 (2003).

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


SDNY Dismisses Another Civil RICO Action; Finding One Securities Transaction(s) Dooms an Otherwise Sufficiently Pleaded Civil RICO Action Alleging Non-Securities Related Wire and Mail Fraud

Zohar CDO 2003-1, Ltd. v. Patriarch, 2017 WL 6628609, __ F. Supp.3d ___ (SDNY, Dec. 28, 2017)

In the above case, Judge William Pauley III granted the Defendants’ motions to dismiss a civil RICO action for being in violation of the PSLRA Amendment to RICO which bars any civil RICO claim that is actionable as fraud in the purchase or sale of securities. See 18 U.S.C. section 1965(c) (“no person may rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of section 1962.”)

This dismissal was issued on the same date as Judge Pauley’s dismissal of another civil RICO action, Dotan Newman v. Jewish Agency for Israel, et al., 2017 WL 6628616 (SDNY, Dec. 28, 2017), and follows a long line of dismissals of civil RICO actions in the SDNY where complex civil RICO cases find themselves on the proverbial chopping block. See e.g., Zamora v. JPMorgan Chase, 2015 WL 4653234 (SDNY, July 31, 2015) (J. Pauley). Judge Pauley’s decisions are well-researched, coherent, and detailed, but the dismissal of the subject Zohar case based on a stringent view of the PSLRA Amendment is concerning.

In Zohar, the Plaintiffs asserted a dozen claims against Defendants predicated on a massive racketeering conspiracy involving the illegal investment and mis-management of Zohar’s assets. Defendants exploited their fiduciary status to expropriate Zohar’s equity in its portfolio companies, pay themselves dividends, and deceive Zohar and its investors into paying exorbitant fees by misreporting the value of Zohar’s collateral.

The legal issue is whether the alleged scheme is actionable as fraud in the purchase or sale of securities, and if any one predicate is so barred, the entire claim is foreclosed by the securities fraud bar codified in the RICO statute.

Judge Pauley discussed precedent that if the alleged conduct could form the basis of a securities fraud claim against any party—be it against, or on behalf of, the plaintiff, defendants or a non-party—it may not be fashioned as a civil RICO claim. To best define what constitutes conduct actionable as fraud in the purchase or sale of securities, courts have consulted an obvious source in Section 10(b) of the Securities Exchange Act of 1934, which—while not identical to the language of the RICO Amendment—covers a broad range of securities fraud. Judge Pauley stated that If even “one predicate act alleges breaches of duty coincident with securities transactions then the whole scheme is subject to the [RICO Amendment].”

This pillar is the death knell for Zohar’s claims. Although finding that two of Defendants’ schemes did not coincide with the purchase or sale of securities as they involved fraud which occurred separate and apart from the sale of Zohar’s CLOs, the court found the because the Complaint alleges a single, ongoing fraudulent scheme, all of Defendants’ alleged acts must be considered together. Thus, while two schemes (the OC Test and Monthly Report allegations) escaped the RICO bar, the allegations relating to Defendants’ theft of Zohar’s equity interests and distributions were fatal to the RICO claim as these equity transactions, tendered as common stock, preferred stock, and LLC membership interests, were governed by the federal securities laws.

The purchase of stock was integral to the scheme to defraud since, without it, Defendants would have lacked the position to claim dividends and exercise control over the portfolio companies. *11. The Judge concluded that while certain allegations here may fall into that category of exempted conduct, there was clearly another component to Defendants’ overarching scheme that involved activity forming the basis for an actionable claim under the securities laws. Here, the post-investment looting involved the purchase and sale of securities.
Therefore, the Judge ruled that a single securities transaction that coincides with the fraudulent scheme can be the death knell of a RICO claim, Zohar’s civil RICO claim was dismissed.
Ed Note: This conclusion severely limits civil RICO plaintiff suits when there may exist just one “single securities transaction” coinciding with the fraudulent scheme despite many other instances of mail and wire fraud which themselves do NOT fall within the PSLRA exception. It will be interesting to see how the Second Circuit views this decision (which would assuredly be appealed).

David J. Stander, Esq. is a civil RICO Attorney who regularly maintains his blog for all to follow recent civil RICO court decisions.


District Court Finds Sufficient “Threat of Continuity” From Alleged Predicate Violations of 18 U.S.C. Section 1832 (Trade Secrets Act Violations)

Bartlett v. Bartlett, 2017 WL 5499403 (S.D. Ill., Nov. 17, 2017)

The court granted the motion to dismiss civil RICO claims alleging “Garden-Variety” wire and/or mail fraud, but denied the motion to dismiss the civil RICO claims based on trade secrets violations. in violation of 18 U.S.C. § 1832.

Mail/Wire Fraud
The court stated that courts in this circuit have been hesitant to allow RICO claims predicated on wire and/or mail fraud alone to proceed, when they are mere garden-variety disputes. See McDonald v. Schencker, 18 F.3d 491, 499 (7th Cir. 1994) (referring to a RICO claim predicated on mail fraud as “nothing more than a garden-variety business dispute recast as mail fraud”); Cmty. Ins. Servs., Ltd. v. United Life Ins. Co., No. 05-CV-4105-JPG, 2006 WL 2038652, at *5 (S.D. Ill. Mar. 24, 2006) (dismissing a RICO action predicated on wire and mail fraud as a “garden-variety fraud case concerning what is best described as a business dispute”); Faith Constr. 4, Inc. v. Girouard, No. 14 CV 2886, 2014 WL 6679118, at *3 (N.D. Ill. Nov. 21, 2014) (dismissing a RICO action that was predicated on mail fraud because the act of mailing was too remote to be the proximate cause of a RICO injury); Wankel v. S. Illinois Bancorp, Inc., No. 06-cv-0619-MJR, 2007 WL 2410328, at *10 (S.D. Ill. Aug. 21, 2007) (“it seems that Plaintiffs’ cause of action constitutes precisely what the Supreme Court and Seventh Circuit courts hope to forestall: ‘RICO’s use against isolated or sporadic criminal activity [such that] RICO [becomes] a surrogate for garden-variety fraud actions properly brought under state law’ ”).

Trade Secrets
Section 1832 was recently added as a predicate offense and it is based on theft of trade secrets, a serious federal offense. The court found that at this stage in the proceedings, the plaintiff has adequately pled that the defendants engaged in theft of trade secrets. The complaint also repeatedly asserts that the defendants intended to convert the trade secrets for their own personal gain and to the detriment of Plaintiff (Mark) and this was enough to satisfy the Twombly pleading standards.

The issue therefore involved whether the plaintiff met the continuity requirement in order to state a valid “pattern of racketeering activity” under RICO. Although only one scheme was involved, the court found that, assuming the plaintiffs allegations were true, the plaintiff adequately pleaded an open-ended scheme predicated on theft of trade secrets as plaintiff has alleged past conduct that “by its nature projects into the future with a [specific] threat of repetition” that satisfies the Twombly pleading standards.

Proximate Cause

The court stated that if the theft of trade secrets allegations are true, the diversion of financial and business data from American and B&B to Quick Cash would directly harm Plaintiff Mark’s financial interests in his holdings. Accordingly, the proximate cause standard was found met.

Ed Note:  The court’s opinion further places nails in the coffins for finding “garden-variety fraud” allegations to be successfully alleged under civil RICO.  Courts focus on the nature of the violation and when more serious criminal-like crimes are alleged, such as extortion, bribery, Trade Secrets Act violations, the courts can find the continuity from the “nature itself of the racketeering activity.”

In a fraud case only, the saving grace would appear to be to find facts to support that this was the “defendant’s regular way of doing business.”  This could include finding other victims which would infer that the activity is not short-term limited, but carries with it the threat of continued activity.

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


Third Circuit Again Addresses Closed-Ended Continuity in Civil RICO Action; Reaffirms Holding That Measure is the Length of Time of Defendants’ Fraudulent Activity

Yucaipa American Alliance Fund I L.P. v. English, __ Fed. Appx. ___, 2017 WL 5483163 (3rd Cir., Nov. 5, 2017)

The Third Circuit confirmed the District Court’s granting of Plaintiff BD/S’s motion to dismiss the RICO claims. The lower court had concluded that Yucaipa lacked RICO standing and had failed to allege a pattern of racketeering activity, and declined to exercise jurisdiction over the remaining state law tort claims.

RICO Injury

The Court first held that the District Court did not err in concluding it lacked RICO standing, stating that the District Court correctly determined Yucaipa’s alleged injuries were not a concrete financial loss and were contingent on the result of the pending bankruptcy litigation.  RICO requires proof of actual monetary loss, i.e., an out-of-pocket loss,” and an injury contingent upon the impact of events in the future which have not yet occurred” will not suffice.

The Court found that Yucaipa’s allegations, first, the loss of value of its first lien debt due to equitable subrogation in the bankruptcy proceeding, and second, attorneys’ fees and expenses from the bankruptcy and related litigation, did not suffice to confer standing for civil RICO liability under section 1964(c). The Court found that the first alleged injury is plainly contingent on the outcome of the pending bankruptcy proceeding, which is still ongoing, and the second alleged injury could not be decided because these attorneys’ fees incurred as a result of the alleged RICO violations are also contingent on the outcome of pending litigation in the bankruptcy court.

Pattern of Racketeering

The court also determined that the District Court correctly concluded that Yucaipa failed to allege a closed-ended continuity of RICO activity (having given up on alleging open-ended continuity). The Court discussed that “because ‘duration is the sine qua non of continuity’ in a closed-ended scheme, … twelve months [between RICO predicate acts] is not a substantial period of time.” *5, citing cases.

The District Court concluded Yucaipa had failed to plead a closed-ended continuity by looking at the dates of the alleged predicate acts in the complaint. The earliest predicate act identified in the complaint was an email sent on September 16, 2011, and the last predicate acts alleged were statements in the involuntary bankruptcy petition filed in May 2012, i.e., only nine months and thus did not satisfy the closed-ended continuity requirement.

Yucaipa contends the District Court erred in calculating the length of the pattern of racketeering arguing the closed-ended continuity should be deemed to begin with the 2009 emails from BD/S to Yucaipa because this is when the “underlying scheme” began.

Yucaipa relies on Tabas v. Tabas, in which the Circuit stated “in civil RICO complaints based on predicate acts of mail fraud ‘the continuity test requires us to look beyond the mailings and examine the underlying scheme or artifice.’ ” 47 F.3d 1280, 1294 (3d Cir. 1995) (quoting Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1414 (3d Cir. 1991)).

In Tabas, the Court considered claims arising out of an alleged RICO conspiracy by a partner in a real estate firm and his business associates to defraud the estate of a deceased partner through mischaracterizing personal expenses as business expenses and receiving compensation not authorized by the partnership agreement. Tabas, 47 F.3d at 1282–85. The alleged predicate acts were instances of mail fraud, but we explained “[e]ach time defendants misrepresented the business nature of an expense, made a questionable charge, or received compensation to which they were not entitled, they lessened the income available to the” plaintiffs. Id. at 1294. We concluded the RICO continuity included each of the fraudulent deductions from the assets of the partnership. Id.

Here,  Yucaipa asked the court to extend the Tabas holding beyond fraudulent conduct to include conduct which did not violate any RICO predicate statute, but that allegedly led to losses due to subsequent RICO predicate acts. The Court found that these discussions (which occurred in year 2009) are not comparable to the fraudulent actions of the defendants in Tabas, which caused direct harm to the plaintiffs, and the Court declined to extend Tabas to these facts. Accordingly, we agree with the District Court’s determination that Yucaipa failed to plead a closed-ended continuity based on RICO predicate acts occurring over a nine-month period.

Ed. Note:   This case addresses issues raised by this author, David J. Stander, Civil RICO Attorney, in a recent article published in the ABA Business and Torts discussing Justice Alito’s concurrence/dissent in Kehr Packages. The holding above is consistent with the holding in Kehr Packages, i.e., duration is the “relevant criminal conduct is the defendant’s deceptive or fraudulent activity, rather than innocent mailings that may continue for a long period of time.” Kehr Packages, at 1418.

Thus, the above holding is the measure in the Third Circuit, even though Justice Alito indicates that the duration “must equal the duration of the related predicates.” Id., at 1423. Duration measured by length of time of mailings/wirings is the view of the Second Circuit.  Reconciling these positions is difficult, but for now, the holding in the Third Circuit, buttressed in part by this instant decision, is the measure is the period of deceptive or fraudulent activity, even if the actual mailings/wirings cover a shorter period of time.

Second Circuit Offers Primer on Extraterritoriality Issues in Civil RICO Litigation

Bascunan v. Elsace, ___ F.3d ___, 2017 WL 4872400 (2d Cir., Oct. 30, 2017)

The Second Circuit reversed, in part, a lower court decision granting a motion to dismiss in which plaintiff, a citizen and resident of Chile and entities owned and controlled by citizen brought civil RICO action against his cousin, who was also citizen and resident of Chile, and the cousin’s employees and corporate entities, alleged the cousin had power of attorney over his finances and stole millions of dollars from him through several fraudulent financial schemes.

Of the four schemes analyzed, two were found to constitute “domestic injury,” and thus provide standing to Plaintiff.

As a matter of first impression, in the Second Circuit and elsewhere, the court analyzed the Supreme Court decision in RJR Nabisco to consider whether the RICO statute applies extraterritorially. The Court determined, as an initial matter, that “[t]he question of RICO’s extraterritorial application really involves two questions”: (1) “do RICO’s substantive prohibitions, contained in § 1962, apply to conduct that occurs in foreign countries?” and (2) “does RICO’s private right of action, contained in § 1964(c), apply to injuries that are suffered in foreign countries?” In answering both questions, the Court applied the presumption against extraterritoriality.

With respect to the first question, the Court held that “RICO applies to some foreign racketeering activity,” explaining that “[a] violation of § 1962 may be based on a pattern of racketeering that includes predicate offenses committed abroad, provided that each of those offenses violates a predicate statute that is itself extraterritorial.”

On the second question, the one directly relevant to this appeal, the Court concluded that a plaintiff must allege a domestic injury. In answering the second question, the Court made a point of separately applying the presumption against extraterritoriality to Section 1964(c). Nevertheless, the Supreme Court stated that the “domestic injury” requirement of Section 1964(c)—more specifically, the fact that RICO’s private right of action lacks language expressly providing recovery for injuries to foreign persons—“does not mean that foreign plaintiffs may not sue under RICO.”

Ultimately, because the plaintiffs had stipulated that they waived their damages claims for any domestic injuries, the Court did not explain how to identify a “domestic injury” and noted only that “[t]he application of this rule in any given case will not always be self-evident, as disputes may arise as to whether a particular alleged injury is ‘foreign’ or ‘domestic.’ ”

Based on this sparse guidance, the Court did not indicate what factors a court should examine to determine whether a plaintiff’s alleged injury is foreign or domestic. If a plaintiff alleges more than one “injury,” courts should separately analyze each injury to determine whether any of the injuries alleged are domestic. If one of the alleged injuries is domestic, then the plaintiff may recover for that particular injury even if all of the other injuries are foreign.

Schemes Not Found to Have Caused “Domestic Injury”

Based on the above, the Second Circuit analyzed each fraud scheme, and concluded first that two schemes, i.e., the Dividend Scheme and the General Anacapri Investment Fraud Scheme, failed to allege a “domestic” injury, as the only domestic element alleged is that Defendant Elsaca transferred these foreign funds to his own accounts in New York, and Elsaca laundered stolen money using bank accounts in the United States and elsewhere.

The Second Circuit ultimately concluded that an injury to tangible property is generally a domestic injury only if the property was physically located in the United States, and that a defendant’s use of the U.S. financial system to conceal or effectuate his tort does not, on its own, turn an otherwise foreign injury into a domestic one. The court thus held that the use of bank accounts located within the United States to facilitate or conceal the theft of property located outside of the United States does not, on its own, establish a domestic injury. In addition, and importantly, the court stated that these injuries did not arise from any preexisting connection between Bascuñán and the United States. To allow such a plaintiff to recover treble damages would thus “unjustifiably permit [foreign] citizens to bypass their own [nation’s] less generous remedial schemes.”

Schemes Finding “Domestic Injury”

The Second Circuit did hold that two other schemes constituted domestic injury, i.e., when certain property—although belonging to a foreign owner—was located within the United States when it was stolen. Thus, the District Court erred in holding that these schemes caused only foreign injuries. Thus, when Defendant Elsaca misappropriated funds held in a New York bank account at J.P. Morgan this scheme was to involve the misappropriation of tangible property located within the United States. Where the injury is to tangible property, the court concluded that, absent some extraordinary circumstance, the injury is domestic if the plaintiff’s property was located in the United States when it was stolen or harmed, even if the plaintiff himself resides abroad. it ensures that both foreign and domestic plaintiffs can obtain civil RICO’s remedy for damage to their property, but only if their property was located within the territorial jurisdiction of the United States. In so doing, it protects the interest each sovereign has in regulating the private property situated in its own territory without extending the reach of American law or discriminating against foreign plaintiffs. Accordingly, the Second Circuit stated that its holding reduces the possibility of international discord. Id. * 11.

The Second Circuit stated that, to be clear, it did not hold that a plaintiff’s place of residence is never relevant to the domestic injury inquiry required by RJR Nabisco. A plaintiff’s residence may often be relevant—perhaps even dispositive—in determining whether certain types of business or property injuries constitute a domestic injury. But with respect to the particular type of property injury alleged here—the misappropriation of Bascuñán’s trust funds from a specific bank account located in the United States—the court concluded that the location of the property and not the residency of the plaintiff is the dispositive factor.

Regarding the second scheme, the BCI Share Theft scheme, the court found that the misappropriation of the bearer shares, located in a safety deposit box in New York, also constitutes the misappropriation of tangible property, and thus a “domestic injury” within the meaning of the civil RICO statute.

Ed Note: This detailed opinion provides a primer on interpreting factual scenarios involving whether a Plaintiff has standing when there is a question as to whether there is “domestic injury.”

David J. Stander is a civil RICO Attorney who focuses on complex issues involved in civil RICO litigation.


Ninth Circuit Reverses and Allows Plaintiff to File Third Amended Civil RICO Complaint

Mai Mgoc Bui v. Ton Phi Nguyen, 2017 WL 4653438 (9th Cir. 10/17/17)

The Court reversed and remanded with instructions so that plaintiff Bui would have another opportunity to amend her complaint. The district court found that Bui’s SAC failed to sufficiently allege each element.

First, the Court found that Bui’s SAC sufficiently pleads the existence of such an enterprise. First, Bui alleges that Defendants had a “scheme to plunder millions of dollars from Mrs. Bui,” and that Defendants “accomplished this plunder of Mrs. Bui’s money by means of deliberate, calculated and malicious legal acts, including actual fraud, wire fraud and forgery.” As evidenced by the SAC’s allegations, this scheme required a common purpose to carry out. Second, the SAC pleads a sufficient “structure or organization,” because, although the SAC alleges that Hung Tran (Hung) and Lan Bich Nguyen (Lan) functioned as the primary actors, the corporate entities controlled by others, and the property transactions facilitation by them, formed a cohesive part of the group Bui alleges defrauded her. Finally, the SAC sufficiently alleges longevity necessary to accomplish the enterprise’s purpose, as it alleged that the Nguyen family operated other fraudulent schemes in the past, which interacted with the instant allegation. As such, the district court erred by concluding that Bui had failed to sufficiently plead the existence of an “enterprise.”

Second, a RICO claim must adequately plead at least “two acts of racketeering activity,” which, in this case, are wire and mail fraud. 18 U.S.C. § 1961(5). Bui alleges four wire transfers and one mailing as the necessary predicate acts of wire and mail fraud, but the district court concluded that, at most, only one of the alleged transfers was wire fraud. The Court disagreed finding that three of the alleged transfers sufficiently plead three instances of wire fraud.

The Court further stated that even if the three instances of alleged wire fraud may not provide a sufficient “pattern,” we cannot say that the amendment would be futile and would contradict the Chodos factors at this motion to dismiss stage of the action. There may be additional facts and legal theories that could be incorporated into a Third Amended Complaint which, as required by the Federal Rules, “[t]he court should freely give … when justice so requires.” Fed. R. Civ. P. 15(a)(2).

Ed Note: There are two major takeaways here: (1) the Court will liberally construe amendments of civil RICO complaints; (2) the Court will reverse even if the district court erred on the threshold issue of finding two acts, without necessity to find whether other elements, such as “pattern of racketeering activity” have been adequately alleged.