Reich v. Betancourt Lopez
858 F.3d 55
2d Cir.2017Background
- Otto J. Reich, a U.S. consultant and former ambassador, and his firm sued principals of Venezuelan energy company Derwick (Betancourt, Trebbau, and initially D’Agostino) claiming an effort to discredit Reich harmed his business and caused lost fees.
- Allegations: Derwick bribed Venezuelan officials to obtain contracts and made false phone calls to induce a bank and client Eligio Cedeño to terminate relationships with Reich.
- Reich pleaded RICO claims (predicate acts: wire fraud from the false calls; Travel Act/bribery for contract-stealing) and state-law claims (defamation-related torts, etc.).
- The district court dismissed RICO claims under Rule 12(b)(6) for failing to allege a RICO “pattern” and dismissed state-law claims for lack of personal jurisdiction; D’Agostino was voluntarily dismissed earlier.
- The Second Circuit affirmed: (1) wire-fraud-only theory lacked continuity; (2) combining wire fraud and Travel Act predicates failed horizontal relatedness; and (3) no personal jurisdiction (general, specific, or tag) over defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether alleged predicate acts form a RICO "pattern" (continuity) | Reich: two false phone calls (wire fraud) show repeated conduct threatening future racketeering | Defendants: two calls over a few months are isolated, no threat of ongoing criminality | Court: Wire-fraud-only theory fails for lack of continuity (too short; no open-ended threat) |
| Whether wire fraud + Travel Act predicates are related (horizontal relatedness) | Reich: predicates together (bribery and false calls) show a multi-year scheme to benefit Derwick and thus are related | Defendants: crimes have different methods, victims, results and purposes; not the same scheme | Court: Vertical relatedness satisfied but horizontal relatedness fails — predicates insufficiently similar despite common participants |
| Validity of RICO conspiracy claim | Reich: conspiracy claim rises/falls with substantive RICO pattern allegation | Defendants: substantive pattern not pleaded, so conspiracy fails | Court: Conspiracy claim dismissed for same reasons as substantive RICO claim |
| Personal jurisdiction over defendants on state-law claims (general, specific, tag) | Reich: defendants have NY contacts (property, counsel, calls) and were served in NY (tag) | Defendants: contacts insufficient for general jurisdiction; calls/defamation excluded from long-arm; tag argument waived on appeal | Court: No general jurisdiction (not domiciled; contacts too few); no specific jurisdiction (defamation-related exception and no transaction giving rise to suit); tag jurisdiction not considered due to waiver |
Key Cases Cited
- H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (pattern requires continuity and relatedness)
- Spool v. World Child Int’l Adoption Agency, 520 F.3d 178 (closed-ended continuity requires crimes over a substantial period)
- Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229 (open-ended continuity: predicate acts as regular way of operating a business)
- United States v. Indelicato, 865 F.2d 1370 (relatedness factors and distinction between primarily legitimate and illegitimate enterprises)
- United States v. Coppola, 671 F.3d 220 (when enterprise is racketeering-based, linking acts to enterprise may suffice)
- Daidone v. United States, 471 F.3d 371 (vertical relatedness sometimes supports horizontal relatedness)
- Schlaifer Nance & Co. v. Estate of Warhol, 119 F.3d 91 (overlap of participants alone insufficient to show relatedness)
- Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50 (framework for specific jurisdiction analysis under NY long-arm statute)
- Daimler AG v. Bauman, 571 U.S. 117 (general jurisdiction: individuals are "at home" where domiciled)
- Best Van Lines, Inc. v. Walker, 490 F.3d 239 (single act of uttering a defamation is not a "transaction of business" for §302(a)(1))