328 P.3d 1049
Ariz. Ct. App.2014Background
- Plaintiff Jerry Hannosh lost about $800,000 betting on Internet sports‑betting websites allegedly run by defendants David, Zalman, and Joseph Segal and sued under Arizona’s racketeering statute (A.R.S. § 13‑2314.04) seeking treble damages and disgorgement of gambling losses.
- He alleged the Segals operated an enterprise conducting a pattern of racketeering activity (promotion of gambling among predicates) but did not allege the games or odds were rigged or that successful bettors were denied promised payouts.
- Defendants moved to dismiss for failure to state a claim (no cognizable injury, lack of proximate cause, insufficient allegations); the superior court granted dismissal and initially awarded defendants attorneys’ fees but later vacated the fee award under the statute’s ‘‘special circumstances’’ provision.
- Both sides appealed; the Court of Appeals reviewed de novo the dismissal and reviewed the fee denial for abuse of discretion (statutory interpretation de novo).
- The court held that voluntary gambling losses, absent allegations of rigging, do not constitute an "injury to his person, business or property" under Arizona RICO and affirmed dismissal; it also affirmed the trial court’s exercise of discretion in denying attorneys’ fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether voluntary gambling losses are an "injury to his person, business or property" under A.R.S. § 13‑2314.04(A) | Hannosh: his lost wagers are a cognizable, reasonably foreseeable injury proximately caused by defendants’ racketeering | Segals: gambling losses are voluntary transfers of money for a chance to win and are not actionable RICO injuries absent fraud/rigging | Held: Voluntary gambling losses are not an actionable injury under Arizona RICO absent allegations (e.g., rigging or deception) that transform the transaction into an unlawful loss |
| Whether the phrase "injury to his person" covers monetary gambling losses | Hannosh: Arizona’s inclusion of "person" makes the statute broader than federal RICO and covers his losses | Segals: phrase contemplates bodily harm or legally protected personal interests, not voluntary economic gambles | Held: "Injury to his person" means bodily harm or injuries to legally protected personal interests; it does not include voluntary gambling losses |
| Whether allegations of implicit threats suffice to allege injury | Hannosh: threats accompanying losses imply harm or coercion | Segals: plaintiff did not allege any emotional or physical harm from threats | Held: Alleged threats were not pleaded to have caused emotional or other compensable injury; plaintiff sought disgorgement only, so threats did not save claim |
| Whether the trial court abused discretion in denying defendants’ request for attorneys’ fees after initially awarding them | Segals: fees should stand; plaintiff failed to show special circumstances warranting denial | Hannosh: disproportionate award relative to his finances and novel legal question justified denying fees under § 13‑2314.04(M) | Held: Court did not abuse discretion in striking fee award under the statute’s ‘‘special circumstances’’ ground; defendants waived some arguments by not raising them below |
Key Cases Cited
- Rosier v. First Fin. Capital Corp., 181 Ariz. 218 (App. 1994) (Arizona RICO patterned after federal RICO and intended to combat white‑collar organized crime)
- State ex rel. Corbin v. Pickrell, 136 Ariz. 589 (Ariz. 1983) (Arizona RICO plaintiff need only allege injury from defendants’ control or conduct of an enterprise by racketeering)
- Lifeflite Med. Air Transp., Inc. v. Native Am. Air Servs., Inc., 198 Ariz. 149 (App. 2000) (definition of pattern of racketeering requires at least two related, continuous predicate acts)
- Chaset v. Fleer/Skybox Intern., LP, 300 F.3d 1083 (9th Cir. 2002) (under federal RICO, gambling or speculative losses generally do not constitute a business/property injury)
- Reed v. Real Detective Publishing Co., 63 Ariz. 294 (Ariz. 1945) (discussion of the scope of the phrase "injury to person" in Arizona law)
- DeJonghe v. E.F. Hutton & Co., 171 Ariz. 341 (App. 1991) (emotional distress damages recoverable under Arizona RICO only with proof of property loss)