Doe v. Trump Corp.
385 F. Supp. 3d 265
S.D. Ill.2019Background
- Plaintiffs (four named individuals) allege that Trump and others promoted third‑party multi‑level marketing programs (notably ACN) through paid, undisclosed endorsements and affirmative misrepresentations about likely profitability and Trump's due diligence.
- Plaintiffs joined ACN as Independent Business Owners (IBOs), paid sign‑up/renewal fees and event/meeting costs, but earned little or no income; they seek class certification for a nationwide damages class and state subclasses.
- Plaintiffs asserted RICO (substantive and conspiracy) claims and various state law claims; defendants moved to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6).
- The court accepted Complaint facts as true for the motion and analyzed whether plaintiffs sufficiently pleaded proximate cause for RICO injury and whether CAFA supports federal jurisdiction over state claims.
- The court dismissed the RICO counts for failure to plead proximate causation (plaintiffs alleged only a "but‑for" link and numerous intervening factors), but retained state law claims under CAFA jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Complaint pleads proximate cause for RICO injury | Plaintiffs: defendants' paid, undisclosed endorsements induced plaintiffs to invest in ACN and thereby caused their net losses | Defendants: plaintiffs' losses stem from intervening factors (ACN's MLM structure, IBO recruiters, individual sales ability, market conditions), not defendants' endorsements alone | Held: Dismissed RICO claims; proximate cause not pleaded (only "but‑for" causation, attenuated by substantial intervening factors) |
| Whether RICO pleading otherwise sufficient (pattern, enterprise, predicate acts) | Plaintiffs: alleged pattern of racketeering activity (wire/mail fraud) via endorsements and promotions | Defendants: challenged sufficiency; proximate cause threshold dispositive | Held: Court did not decide substantive RICO elements because proximate cause failure disposed of RICO counts |
| Whether federal court has subject‑matter jurisdiction over state claims under CAFA | Plaintiffs: class likely exceeds 100, minimal diversity exists, amount in controversy > $5M | Defendants: challenged amount and other CAFA elements | Held: CAFA jurisdiction exists; state claims survive because plaintiffs showed reasonable probability of numerosity, minimal diversity, and amount in controversy |
| Whether plaintiffs must plead absence of alternative causes at pleading stage | Plaintiffs: need not rule out other contributing factors at pleading | Defendants: RICO requires a more direct causal nexus than common‑law fraud | Held: RICO proximate cause is more stringent than common‑law causation; plaintiffs did not meet it |
Key Cases Cited
- Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (establishes proximate‑cause requirement for civil RICO and limits recovery to direct victims)
- Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (rejects RICO recovery where intervening factors render causal link attenuated)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (focuses on directness of relation between fraud and harm in RICO context)
- Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639 (permits RICO recovery where misrepresentations, though directed at third party, directly caused plaintiffs' zero‑sum harm)
- Empire Merchants, LLC v. Reliable Churchill LLLP, 902 F.3d 132 (2d Cir.) (applies Holmes/Anza proximate‑cause principles; dismissal where loss causation uncertain due to alternative explanations)
- Moore v. PaineWebber, Inc., 189 F.3d 165 (2d Cir.) (explains need for both but‑for and loss causation in RICO suits)
- DeFalco v. Bernas, 244 F.3d 286 (2d Cir.) (elements required to plead substantive RICO violation)