27 F.4th 1253
7th Cir.2022Background
- Plaintiffs Joy Ryder and Rhonda Lee allege repeated sexual assaults by David Hyles at First Baptist Church / Hyles-Anderson College in the 1970s and a later institutional cover-up by the Church and College.
- Ryder alleges she paid tithes, fees, and tuition for church and school activities in the 1970s; Lee does not allege she paid money then.
- Plaintiffs sued under RICO (18 U.S.C. §§ 1962, 1964(c)) in 2020, claiming the Enterprise’s conduct injured their “business or property.”
- Defendants moved to dismiss under Rule 12(b)(1), arguing plaintiffs failed to allege the §1964(c) business-or-property injury required for subject-matter jurisdiction.
- The Seventh Circuit held the business-or-property requirement is a non‑jurisdictional element (so dismissal is via 12(b)(6)), and affirmed dismissal on the ground plaintiffs failed to plausibly allege a qualifying business-or-property injury (their harms are personal and alleged property harms were too attenuated/speculative).
- Court noted dismissal under 12(b)(6) is ordinarily with prejudice and gave reasons why amendment would likely be futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1964(c)’s “business or property” requirement is jurisdictional | Plaintiffs proceeded on theory they satisfied the requirement and thus had standing | Defendants treated the requirement as jurisdictional and moved under Rule 12(b)(1) | Requirement is a non‑jurisdictional element of a RICO claim; dismissal should be under Rule 12(b)(6) (court modified district court’s dismissal label) |
| Whether plaintiffs plausibly alleged a business-or-property injury from deprivation of bargained‑for access/value of church activities | Ryder/Lee: payments entitled them to educational/activities benefits; value was diminished by misconduct/cover-up | Defendants: alleged harms are personal injuries or only indirect economic consequences, not property injury | Court: harms are personal (sexual abuse); any diminution in value is an indirect/derivative effect and insufficient for §1964(c) |
| Whether plaintiffs plausibly alleged misappropriation of funds (tithes/tuition) used to fund later sham investigation | Plaintiffs: Church used fees/donations to fund a sham 2010s investigation, amounting to misappropriation of property | Defendants: plaintiffs pled no causal or temporal link showing 1970s payments funded investigations decades later | Court: allegation is speculative and amorphous—no plausible link shown—insufficient to plead a RICO property injury |
Key Cases Cited
- Evans v. City of Chicago, 434 F.3d 916 (7th Cir. 2006) (previously characterized §1964(c) business-or-property requirement as jurisdictional)
- Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010) (courts should avoid mislabeling substantive elements as jurisdictional)
- Arbaugh v. Y & H Corp., 546 U.S. 500 (2006) (distinguishing jurisdictional rules from elements of a claim)
- Doe v. Roe, 958 F.2d 763 (7th Cir. 1992) (RICO does not compensate personal injuries and pecuniary consequences flowing from them)
- Reiter v. Sonotone Corp., 442 U.S. 330 (1979) (phrase “business or property” excludes personal injuries)
- Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688 (7th Cir. 2015) (dismissal under Rule 12(b)(1) is without prejudice)
- Runnion ex rel. Runnion v. Girl Scouts of Greater Chicago & Nw. Indiana, 786 F.3d 510 (7th Cir. 2015) (plaintiff should ordinarily be given at least one opportunity to amend after a 12(b)(6) dismissal)
- Loja v. Main St. Acquisition Corp., 906 F.3d 680 (7th Cir. 2018) (district court may deny leave to amend as futile)