BCS Services, Inc. v. HEARTWOOD 88, LLC
2011 U.S. App. LEXIS 6003
| 7th Cir. | 2011Background
- Two consolidated RICO/mailer fraud suits in which plaintiffs allege a scheme to rig Cook County tax lien auctions through related-entities rule violations.
- The County allows only one bidding agent per buyer; defendants allegedly used multiple related entities to flood auctions with bids.
- Plaintiffs, described as two major bidders, contend the conspiracies caused them to lose liens to multi-armed rivals and suffer economic injury.
- District court dismissed for lack of proximate causation; on appeal, we review proximate cause and damages challenging that ruling.
- Supreme Court and Seventh Circuit precedents establish a probabilistic causation framework; question is whether injuries to plaintiffs were proximately caused by fraud.
- Court previously held the fraud could be mail fraud under RICO and remanded; this opinion resolves causation and damages issues on record.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proximate causation in RICO | Plaintiffs contend fraud directly caused loss of liens. | Defendants argue causal chain too tenuous; intervening auction dynamics break proximate causation. | Not satisfied on record; remand to address damages and causation more fully. |
| Damages proof in probabilistic injury | Damages can be proven probabilistically given identical zero-percent bids and large sample. | Damages require precise record of specific liens won/lost and losses. | Damages evidence sufficient to support a probabilistic recovery; trial proper for amount. |
| Interference with business expectancy | County rule protected plaintiffs’ expectancy of liens free from fraud; intentional interference supports claim. | Need specific liens or direct business expectancy; generic interference insufficient. | Plaintiffs may prove interference with a business expectancy; sufficient under Illinois law. |
| Alternative grounds for relief | RICO causation and damages show recoverable losses; independent state-law claim survives. | Without causation and damages, state-law claim fails. | Reversed on RICO causation/damages and remanded; state-law claim addressed on remand. |
Key Cases Cited
- Phoenix Bond & Indemnity Co. v. Bridge, 477 F.3d 928 (7th Cir. 2007) (standing and proximate cause considerations in RICO)
- Milam v. Dominick's Finer Foods, Inc., 588 F.3d 955 (7th Cir. 2009) (probabilistic damages example in fraud)
- HK Systems, Inc. v. Eaton Corp., 553 F.3d 1086 (7th Cir. 2009) (proximate cause and foreseeability in torts/RICO)
- United States v. Johnson, 380 F.3d 1013 (7th Cir. 2004) (causation and intervening causes principles)
- James Cape & Sons Co. v. PCC Construction Co., 453 F.3d 396 (7th Cir. 2006) (limiting liability to foreseeable consequences)
- In re Teknek, LLC, 563 F.3d 639 (7th Cir. 2009) (causation/foreseeability in damages)
- Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (U.S. 1992) (deterrence/causation principles in damages)
- Matsuyama v. Birnbaum, 452 Mass. 1 (Mass. 2008) (causation and damages standards in professional contexts)