BCS Services, Incorporated v. BG Investments, Incorporated
2013 U.S. App. LEXIS 17809
| 7th Cir. | 2013Background
- Consolidated appeals from a RICO/mail fraud case arising from Cook County tax lien auctions.
- Two groups, Sass and Gray, allegedly used a multi-bidder scheme to defeat single-bidder rules and obtain liens.
- Winning liens could be redeemed or lead to tax deeds; bidders’ penalties determined the lien’s cost.
- Plaintiffs claimed defendants’ concealed multi-bidder scheme caused them to lose potential liens and profits.
- Jury awarded plaintiffs damages (roughly $7 million) plus attorney’s fees; district court trebled RICO damages and awarded costs.
- Defendants challenged damages methodology, setoffs from settlements, and allocation of fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| RICO injury and proximate causation | Plaintiffs were injured by defendants’ fraud in obtaining tax liens. | No proximate causation or property loss by plaintiffs. | Plaintiffs sufficiently injured; damages permitted. |
| Property vs intangible loss for mail fraud | Fraud deprived plaintiffs of property (liens) or their value. | Only intangible rights at stake if any. | Tax liens qualify as property; loss due to unlawful acquisition supports mail fraud. |
| Damages estimation when fraud impeded measurement | Damages can be estimated by reasonable methods despite imperfect records. | Damages must be precise; video-based adjustments are improper. | Damages may be estimated; video-based adjustment reasonable and permissible. |
| Bid-win percentage methodology | Use group-wide bid-win percentage to approximate honest-bid results. | Exclude each defendant individually to bias results against defendants. | Group-based percentage appropriate; individual exclusions improper. |
| Setoff/one-satisfaction rule and fees | Settlements should be offset against judgment; punitive damages influence allocation. | Setoff should reflect punitive vs compensatory components; settlements not entirely compensatory. | Setoff allowed with proper allocation; fees not excessive; overall award reasonable. |
Key Cases Cited
- Phoenix Bond & Indemnity Co. v. Bridge, 477 F.3d 928 (7th Cir. 2007) (injury to plaintiffs by fraudulent acquisition of liens; RICO/§1341 relevance)
- United States v. Security Industrial Bank, 459 U.S. 70 (1982) (tax liens as property; money or property under mail fraud)
- PacifiCare Health Systems, Inc. v. Book, 538 U.S. 401 (2003) (trebling under RICO is compensatory not punitive)
- Cook County v. United States ex rel. Chandler, 538 U.S. 119 (2003) (RICO treble damages are compensatory; related holdings)
- Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987) (purpose of trebled damages and punitive considerations)
- Mid-Atlantic Telecom, Inc. v. Long Distance Services, Inc., 18 F.3d 260 (4th Cir. 1994) (damages estimation when causation is broad)
- Olympia Equipment Leasing Co. v. Western Union Telegraph Co., 797 F.2d 370 (7th Cir. 1986) (permissible sector of damages estimation and evidence standards)
- United States v. Dunn, 961 F.2d 648 (7th Cir. 1992) (good faith belief does not negate falsity of statements)