*1 CORP. al. v. IDEAL STEEL SUPPLY ANZA et 5, June Argued No. 04-433. March 2006 Decided *2 petitioners. argued the cause for David C. Frederick him on the were Richard L. William With briefs Huffman, Brodsky, M. and David Rivkin. V. Roddy argued
Kevin P. the cause and filed a brief for respondent.* opinion delivered the Court. Kennedy
Justice Corrupt Organizations The Racketeer Influenced and Act (2000 (RICO), §§ III), Supp. 18 U. S. C. 1961-1968 ed. and prohibits involving “pattern certain conduct of racketeer (2000 ed.). §1962 ing activity.” One of enforce RICO’s private right ment mechanisms is a of action, available to “[a]ny person injured property by in his business or reason *3 1964(c). § of a violation” of RICO’s substantive restrictions. In Holmes Corporation, v. Securities Investor Protection (1992), 503 U. S. plaintiff may 258, 268 this Court held that a 1964(c) § sue alleged under if the RICO violation was proximate plaintiff’s injury. cause of the The instant requires apply case principles us to discussed in Holmes dispute to a competing between two. businesses.
I Because this case arises from a motion to dismiss, we ac cept allegations as true the factual in the amended com plaint. County See Leatherman v. Tarrant Narcotics Intel ligence (1993). and Unit, Coordination 163, 164 U. S. (Ideal)
Respondent Supply Corporation Ideal Steel sells products along steel mill supplies with related and services. operates It two store locations in one in York, New Queens and the Sup- other in the Bronx. Petitioner National Steel Schaerr, Klein,
*Gene C. Coberly, Conrad, Linda T. B. Charles Robin S. and Amar D. Sarwal filed a brief for the Chamber of Commerce of the United States of America as amicus curiae urging reversal.
Henry H. Blakey Rossbacher and G.Robert filed a brief for the National Association of Shareholder as amicus curiae ur- Attorneys and Consumer ging affirmance. (National), Joseph by petitioners and Vincent
ply, owned Inc. competitor. offers a simi- principal National is Ideal’s Anza, operates one too, array products it, and services, lar one in the Bronx. in store Queens petitioners District Court in the United States sued Ideal petition- It claimed York. District of New for Southern racketeering engaged scheme aimed unlawful ers were an expense.” “gaining] share at Ideal’s sales and market practice adopted According App. Ideal, National 7. requisite to cash- failing charge sales tax New York conducting transactions that paying when customers, even prac- exempt This tax under state law. from sales were affecting prices without to reduce its tice allowed National allegedly profit margin. submitted fraudu- its Petitioners Department of Taxa- York lent tax returns to New State to conceal their conduct. tion and Finance an effort complaint two contains, here, as relevant Ideal’s amended petitioners, submit- The claims assert that RICO claims. ting acts of returns, tax committed various the fraudulent mail) (when they and wire mail fraud sent the returns (when electronically). they See 18 U. S. C. fraud sent them (2000 III). Supp. and wire §§1341, ed., Mail fraud “racketeering activity” purposes of fraud are forms of 1961(1)(B). allegedly consti- Petitioners’ conduct RICO. *4 1961(5)(2000 § “pattern racketeering activity,” tuted a of see ed.), were submitted on an because the fraudulent returns ongoing regular and basis. Joseph
Ideal asserts in its first cause of action 1962(c), § Anza violated which makes it unlawful Vincent any enterprise “any person employed by or associated with engaged affect, or the of which interstate or in, activities directly foreign participate, commerce, to conduct or or indi- rectly, enterprise’s through a in the conduct of such affairs pattern activity racketeering of or collection of unlawful complaint goal, which debt.” The states that the Anzas’ they give competitive advantage achieved, was to National a over Ideal. against
The second cause of action is asserted all three § petitioners. 1962(a), alleges It a violation of which makes any person it unlawful for who has received income derived pattern racketeering activity from a “to use or invest” acquisition any that income “in interest or in, the estab- operation enterprise engaged lishment of,” or an in or affect- ing foreign interstate or commerce. As described in the complaint, petitioners generated by used funds their fraudu- open lent tax scheme to National’s Bronx location. The opening facility “significant of this new caused Ideal to lose App. business and market share.” 18. complaint
Petitioners moved to dismiss Ideal’s under Fed- 12(b)(6) 9(b). eral Rules of Procedure The District Civil 12(b)(6) granted Court holding motion, Rule that the complaint upon failed to state a claim which relief could be granted. began proposition court from the that to as- predicated sert a claim on mail fraud or wire fraud, a plaintiff misrepresenta- must have relied on the defendant’s having alleged petitioners’ tions. Ideal not that it relied on false tax go returns, the court concluded Ideal could not for- ward with its RICO claims. appealed,
Ideal Appeals and the Court of for the Second judgment. Circuit vacated the District Court’s 373 F. 3d (2004). 1962(c) § Addressing Ideal’s claim, the court held complaint alleges pattern where a racketeering ac- tivity give “that was intended to and did the defendant a competitive advantage plaintiff, complaint over the ade- quately pleads proximate cause, and the has stand- ing pursue a civil Id., RICO claim.” at 263. This is the explained, case, depended the court “even where the scheme on fraudulent communications directed to and relied on party plaintiff.” third rather than the Ibid. respect
The court reached the same conclusion with 1962(a) adequately Ideal’s claim. It reasoned that Ideal *5 injury by of reason alleged an pleaded its claim because racketeering proceeds, “as of petitioners’ use and investment predicate of simply acts to the injury traceable from distinct of racketeering the business the conduct of or to alone enterprise.” 264. Id., at (2005). granted certiorari. U. S.
We II largely analysis begins evident, will become as Our and,— complaint filed from a Holmes. That case arose ends—with (SIPC), Corporation a Investor Protection the Securities private corporation duty to reimburse the customers with registered meet unable to broker-dealers who became obligations. peti- their financial claimed that SIPC conspired manipulate Holmes, Robert with others to tioner, prices. fraud, stock the market detected the When [two] prices plummeted, share the “decline caused resulting broker-dealers’ difficulties in their even- financial nearly liquidation to tual and SIPC’s advance of million $13 S., cover their customers’ 503 U. 263. claims.” including par- sued on theories, SIPC several that Holmes ticipated enterprise’s through the conduct of an affairs 1962(c) § pattern racketeering activity in violation of 1962(d). § conspired to do so in violation of The Court held that SIPC could not maintain its RICO against alleged claims role Holmes his in the scheme. 1964(c), interpretation The decision relied on a careful provides persons injured “by which a civil cause of action recog- of” a reason defendant’s violation. The Court phrase broadly “by nized the reason be of” could read merely require for” claimed violation was a “but plaintiff’s injury. rejected of the Id., cause at 265-266. It reading, noting however, this that Con- “unlikelihood gress factually injured plaintiffs re- meant to allow all Id., cover.” at 266.
457 1964(c) § Proper interpretation required of consideration of statutory history, the “Congress which revealed that mod 1964(c) § provision eled on the civil-action of the federal anti §4 Clayton trust laws, of the Id., Act.” at In 267. Associ ated Gen. Carpenters, Cal., Contractors Inc. v. 459 U. S. (1983), 519 plaintiff’s the right Court held that “a to sue § required under 4 showing a that the defendant’s violation injury, not was a ‘but for’ proxi cause of his but was the mate cause supra, as (citing Holmes, well.” at 268 Associ 534). supra, ated Gen. reasoning, Contractors, This 1964(c).” § “applies just Court noted in readily Holmes, as 503 S.,U. at 268.
The Holmes Court turned to the common-lawfoundations proximate-cause requirement, of the specifically and the “de- mand for some direct relation between the asserted injurious and alleged.” conduct Ibid. It concluded that even subrogated if rights SIPC were ag- to the of certain grieved satisfy customers, the RICO claims could not this requirement deficiency, of directness. The the Court ex- plained, was that “the link is too remote between the stock manipulation alleged and the being purely customers’ harm, contingent on the harm suffered the broker-dealers.” Id., at 271.
Applying principles present of Holmes to the we case, 1962(c). conclude Ideal cannot maintain its claim based on 1962(c), Section conducting partici- as noted above, forbids or pating enterprise’s in the through pat- conduct of an affairs racketeering tern activity. The Court has indicated compensable injury flowing provision from a violation of “necessarily by predicate is the harm sufficiently acts pattern, related to constitute a for the essence of the viola- tion is the commission of those acts in connection with the enterprise.” conduct of an Sedima, R. Co., S. P. L. v.Imrex (1985). U. S. theory Joseph Ideal’s is that and Vincent Anza harmed it by defrauding authority using the New York tax prices designed to proceeds lower from the fraud offer alleged violation The RICO more customers. attract through affairs conducted is that the Anzas National’s Ideal of. victim pattern and wire fraud. direct of mail fraud It was York, Ideal. conduct was the State New this being that lost State that was defrauded the State result. tax revenue as a *7 analysis proximate-cause an proper of the
The referent conducting through alleged practice business of National’s defrauding pattern sure, the To be asserts of State. Ideal charge the Anzas failed to it suffered its own harms when applicable The Ideal’s sales tax. cause of customers for the (offering however, is a set of actions lower harms, asserted (de- alleged prices) entirely distinct from the RICO violation State). frauding plaintiff’s the The attenuation between the arises a differ- harms and the claimed RICO violation from alleged Holmes, than the ent source in this case where through only the harms violations were linked to asserted inability obliga- the meet their financial broker-dealers’ to proximate tions. the of causation is Nevertheless, absence equally clear in both cases. by considering
This conclusion is confirmed the directness requirement’s underlying premises. at 269- S., See U. difficulty motivating principle 270. One is the that can arise attempts damages when a court to the ascertain (“[T]he some remote an id., action. See at 269 less direct injury is, the more difficult it the becomes ascertain damages plaintiff’s violation, amount of a attributable factors”). independent, as distinct from The instant other, alleges case is illustrative. Ideal is its own loss prices resulting of sales from cash- National’s decreased for paying National, however, customers. could lowered have prices any its as number reasons unconnected to the pattern may serted It received fraud. have a cash inflow from some other source or that the sales concluded additional justify profit margin. lowering prices would Its a smaller authority. required it the state tax in no sense to defraud company tax fraud does the fact that a commits Likewise, company prices; not mean the will lower its the additional go anywhere acquisition to research cash could from asset (“The development payouts. id., at 271 to dividend Cf. simply pay their bills, broker-dealers cannot intervening insolvency conspirators’ acts to the connects nonpurchasing general losses suffered customers and creditors”). discontinuity
There is, addition, a second between injury. RICO violation and the asserted Ideal’s lost sales petitioners’ could have resulted from factors other than al- leged gain acts of lose and customers for fraud. Businesses many require complex and it would reasons, assessment portion product establish what lost of Ideal’s sales were (“If prices. id., of National’s decreased at 272-273 Cf. nonpurchasing customers were allowed to the district sue, court would first need to determine the extent to which their inability to collect from the broker-dealers was the result of *8 alleged conspiracy manipulate, opposed say, the to as to, poor practices broker-dealers’ business or their failures to markets”). anticipate developments in the financial The attenuated connection between Ideal’s and the injurious implicates Anzas’ conduct thus fundamental con- Notwithstanding expressed cerns the lack of Holmes. any appreciable duplicative risk of which is an- recoveries, proximate-cause inquiry, other consideration relevant to the why help id., see illustrate Ideal’s 269, these concerns to alleged injury was not the direct result of a violation. RICO illustrating point speculative Further this is the nature of proceedings permitted that would follow if Ideal were considering maintain its A court the claim would claim. begin by calculating portion price need to of National’s racketeering drop alleged pattern ac- attributable to the tivity. portion of Ideal’s It next would have to calculate drop. part price lost sales attributable to the relevant of the recognized in is proximate Holmes causation The element of inquiries types uncertain prevent intricate, meant to these litigation. particular reso- overrunning It has from RICO brought by competi- applied economic to claims nance when the line between unchecked, if left could blur which, tors, antitrust laws. RICO and the especially requirement of a direct causal connection alleged victims of an
warranted where the immediate RICO expected pursuing violation can be to vindicate laws (“[D]irectly injured id., their at 269-270 own claims. See generally victims can be counted on to vindicate the law as any private attorneys general, problems at- without of the upon by plaintiffs injured remotely”). tendant suits more Again, the instant case is instructive. Ideal accuses the defrauding Anzas of York a State of New out of substan- money. allegations tial amount of If the true, are the State expected pursue appropriate adju- can be remedies. The relatively dication of the claims, moreover, State’s would be straightforward; may while it be difficult to determine facts such as the number of sales Ideal lost due to National’s tax practices, considerably it is easier to make the initial calcula- tion of how much tax revenue the Anzas withheld from the State. There is no need to broaden the universe of action- permit by parties able harms to suits RICO who have been injured only indirectly. Appeals contrary ap
The Court of conclusion, reached parently reasoning allegedly sought that because the Anzas gain competitive advantage over Ideal, is immaterial they accomplish goal. whether took an indirect route to their 3d, See 373 F. at 263. This rationale not accord does with Holmes. A cannot circumvent the *9 proximate-cause requirement simply by claiming that the de competitor’s fendant’s aim was to increase market share at expense. Contractors, S., See Associated Gen. 459 U. at 537 (“We allegation improper are also satisfied that an of mo- any complaint panacea tive is not a that will enable ... dismiss”). a motion to a court evaluates a withstand When proximate question central it causation, RICO claim for alleged directly must ask is whether the violation led to the plaintiff’s injuries. ease, In the instant the answer is no. 1962(c) § satisfy the re- We hold that Ideal’s claim does not quirement proximate causation. alternatively hold,
Petitioners ask us to in line with the granting petitioners’ District Court’s decision motion to dis- plaintiff may predicated miss, that a not assert a claim relied, mail on fraud or wire fraud unless it demonstrates They argue misrepresentations. on the defendant’s light private right interpreted in RICO’s of action must be principles, law a fraud common-law and that at common requires plaintiff prove action Because reliance. proximate-cause requirement Ideal has not satisfied the ar- ticulated in Holmes, we have no occasion address sub- question showing required. stantial whether a of reliance is S., Cf. U. 275-276.
Ill complaint based The amended also asserts a RICO claim 1962(a). § alleges petitioners’ tax on a violation of The claim provided open scheme them funds to a new store with otherwise would have Bronx, which attracted customers who purchased from Ideal. proximate-cause petitioners
In that the this Court contend analysis identically purposes of Ideal’s should function 1962(c) 1962(a) (Petitioners § § also con- claim and its claim. plead an tend that “a civil RICO does 1962(a) § merely by proximately al- a violation of profits leging corporate back defendant reinvested argument but this 5, into Brief for Petitioners n. itself,” it.) developed, It to address has not been and we decline 1962(a), like private is true that actions for violations §1962(c), under must be asserted actions for violations of *10 1964(c). cognizable § under a claim is true that It likewise is 1964(c) proximately alleged § violation if the defendant’s inquiry, proximate-cause injury. plaintiff’s The be- the “relation requires careful consideration however, injurious conduct al- asserted and tween the 1962(c) § and supra, Because leged.” at 268. Holmes, 1962(a) § prohibitions, at least debat- it is set forth distinct analyzed in an claims should be able whether Ideal’s two purposes. proximate-cause identical fashion for adequately pleaded Appeals held that Ideal The Court of 1962(a) § did not claim, 3d, 264, see 373 F. but court its proximate decline to consider Ideal’s address causation. We 1962(a) § Appeals’ claim of the Court of without benefit analysis, particularly given parties have devoted that the 1962(c) § nearly all attention in this Court to the claim. their Appeals’ judgment We therefore vacate the Court of with 1962(a) § respect to Ideal’s the court remand, claim. On petitioners’ alleged determine should whether violation of 1962(a) § proximately injuries caused the Ideal asserts.
[*] [*] [*] judgment Appeals part of the is reversed in Court part. pro- in vacated The case is remanded for further ceedings opinion. consistent with this
It is so ordered. Justice Scalia, concurring. join opinion
I of the I also note that it is incon- Court. 1962(c) injury alleged ceivable that the in the 18 U. S. C. protected claim at issue here is within the zone of interests perpetrated upon cause of action for fraud New York State. See Holmes Investor Protection v. Securities (1992) Corporation, 503 U. S. 286-290 con- J., (Scalia, curring judgment). in Thomas,
Justice concurring part dissenting part. *11 today may brought
The Court limits the lawsuits that be provision under the civil enforcement the of Racketeer In (RICO Corrupt Act), Organizations and fluenced Act or 18 (2000 § III), seq. Supp. by adopting U. S. C. 1961 et ed. and theory proximate supported a of causation that is neither by by the nor Act our decision in Holmes v. Securities Inves Corporation, (1992), tor 258, Protection 503 U. S. on principally stringent which the Court The relies. Court’s proximate-causation requirement precluding succeeds in re 1962(c) § covery alleging in cases that, a violation of like the present nothing organized one, have to do with crime, the target approach of the However, RICO statute. the Court’s recovery plaintiffs injuries pre also eliminates whose are cisely Congress remedy through those that aimed to the au of thorization civil RICO suits. Because this frustration of congressional directly contrary intent is to the broad lan guage Congress employed to confer a RICO of action, cause respectfully I opinion. from dissent Part II of the Court’s
I language provision, broadly of the civil RICO which permits recovery by person injured in his business or “[a]ny property reason of a violation” of the Act’s substantive (2000 1964(c) § ed.), plainly restrictions, covers the lawsuit brought by respondent. alleges Respondent that it was in- jured injury business, in its and that this was the direct re- 1962(c).1 § petitioners’ sult App. of violation of 12-17. In 1Respondent also that alleges petitioners injured through its business § 1962(a), violation of although parties dedicate little attention to this 1962(c) § light issue. In of the Court’s disposition claim 1962(a) § parties, limited discussion of I Court agree with the that we give should the Court of reconsider Appeals opportunity first 1962(a) § opinion. claim. Accordingly, join I Part III the Court’s required plaintiff is that a we held however, Holmes, a ‘but for’ was “not violation the RICO to show as well.” proximate cause injury, was the but his cause of “ ‘proximate cause’ employed the term We at 268. S., 503 U. person’s to limit judicial used tools generically the to label person’s own consequences responsibility for the “ justice de- what ‘ideas of reflect These tools Ibid. acts.” administratively possible conven- mands, or of what ” Ibid, & D. Dobbs, Keeton, R. (quoting D. Keeton, W. ient.’ (5th p. Law of Torts Keeton on Prosser and Owen, Keeton)). 1984)(hereinafter Prosser & ed. proximate-cause consid-
Invoking the common-law one of prove “some must that a RICO we held erations, injurious and the asserted relation between the direct *12 Today ap- alleged.” at 268. Court S., 503 U. conduct rela- plies that the “attenuated to conclude this formulation 1962(c) injury tionship” and Ideal’s the violation of between expressed in Holmes” and “implicates fundamental concerns equally proximate clear in causation is that the “absence determina- Ante, at But the Court’s 459, both cases.” 458. theory from that of “directness” distinct tion relies on adopted Holmes. plaintiff explained com- that “a who Holmes,
In the Court merely plained flowing the misfortunes visited of harm from generally person by upon acts was a third the defendant’s S., to recover.” 503 U. said to stand at too remote a distance pre- in in Holmes was indirect at 268-269. The partici- alleged cisely to have was this sense. defendant manipulation two pated that disabled in a stock scheme meeting obligations to customers. their broker-dealers from Accordingly, plaintiff, Protection Investor Securities (SIPC), nearly Corporation to million had to advance $13 of customers of those broker-dealers. cover the claims attempted claim that it was subro- to sue based on the SIPC gated rights of the broker-dealers of those customers manipulated that purchase We held securities. who did not proximately nonpurchasing injury was not customers’ conspirators conduct, caused the defendant’s because “the injured allegedly have customers insofar as the these manipulation injured stock first the broker-dealers and left pay them without the wherewithal customers’ claims.” Id., at 271.2 injury in
Here, contrast, it was not New York’s that caused respondent’s damages; petitioners’ it was own con- rather, namely, underpayment permitted their of tax—that duct— respondent’s prices thereby away them to undercut take acknowledgment its Indeed, business. Court’s appreciable duplicative recovery there is here, no risk of effectively Holmes, contrast to ante, is a concession petitioners’ damages term indirect, are not as that is used (“[RJecognizing Holmes. S., See 503 U. at 269 claims of indirectly injured adopt complicated would force courts to apportioning damages among plaintiffs rules removed at dif- ferent levels of from the violative acts, obviate the recoveries”). multiple risk of The mere fact that New York petitioners’ pre- a direct victim does not violation clude Ideal’s claim that it too is direct victim. Because the petitioners’ underpayment directly respondent’s tax injury, recovery. respondent’s Holmes does not bar respondent
The Court nonetheless contends that has failed proximate by relying to demonstrate cause. It does so on *13 require- our in observation that Holmes the directness “ appropriate injury ‘[t]he ment is an is, because less direct the more difficult it becomes ascertain the amount of a
2 Holmes, on in damages, Sutherland’s treatise on which the Court relied labels the of type party injured, same claims indirect: those where one is and it very injury wrongful is that not the the tortfea behavior —and Sutherland, injury sor —that 1 plaintiff. causes to the See J. Law of (1882) (hereinafter Sutherland). Damages Indeed, every 55 example cited Holmes; in principle parallels Sutherland in illustration of this would not injured injury be absent to another victim. See Suther land 55-56.
466 damages violation, as distinct to the
plaintiff’s attributable (quoting independent, Ante, at factors.’” other, from citing Con supra, Associated Gen. Holmes, turn, at (1983)). Carpenters, In Inc. v. U. S. Cal., tractors of for the District that it would be hard Holmes, we noted failure of the broker-dealers’ to determine how much Court pay the fraud and how much their customers was due to affecting the broker-dealers’ busi was due to other factors contends ness success. 503 U. at 273-274. The Court S., that difficult to “ascertain the dam here, Holmes, as is ages Ante, at caused some remote action.” 458. difficulty ascertaining
The Court’s reliance on of damages by petitioners’ amount of Ideal’s unlawful damages misguided. acts to label those indirect is Holmes simply and Associated General Contractors held that one injuries compensable reason that indirect should not be is injuries supra, that such are difficult to Holmes, ascertain. supra, 269; at Contractors, Associated Gen. 542. We did adopt proposition any injuries the converse that are pur- difficult to ascertain must be classified as indirect for poses determining proximate causation.3 certainty damages,
Proximate cause and while both re- plaintiff’s responsibility prove lated to the that the amount damages fairly he seeks is attributable to the defendant, requirements are recovery distinct in tort.4 See 4 Re- 3Indeed, Contractors, in Associated General squarely we did not even hold that the reason that indirect damages compensable are not was ascertainable; the damages easily instead, were not merely recognized we the empirical indirect, fact that “[plartly because it is and partly because the alleged on may produced by effects the Union have been independent factors, damages S., Union’s claim highly speculative.” is also 459 U. at 542. 4Sutherland described the interrelation between the concepts: two “A uncertainty fatal may infect a case where an easily provable, but the alleged responsible cause cannot be sufficiently established as to the whole or part injury. may some of that So it exist where a known *14 (Second) (1977) § (certainty statement of Torts 912 of dam (1963-1964) causation). §§430-431 ages); (proximate 2 id,., plaintiff injury is, That to recover, a must show that his both sufficiently judgment connected to the tort that “the moral practical recognize [will] responsibility sense of mankind in the domain of spe morals,” Sutherland 18, and that the pecuniary advantages, cific alleged the loss of which is as damages, “would have resulted, and, therefore, that the act complained prevented them,” id., at 106-107. Holmes and Associated primarily General Contractors dealt with showing. the former The Court’s discussion of the union’s “highly speculative” damages in Associated General Con tractors difficulty focused not proving precise on the the damages, amount of speculative but with “the tenuous and relationship character of the alleged between the antitrust alleged injury.” violation and the Union’s 459 S.,U. at 545. relationship Here, the alleged between the RICO violation alleged injury underpaid is clear: Petitioners sales permitting tax, undercharge them to inflicting tax, sales competitive injury respondent. on question with which expresses prove concern—whether Ideal can Court damages amount of its actual certainty,” “with sufficient permit recovery Sutherland simply 106, 107, to not be —is fore the Court.
It is noting nonetheless worth that the Court overstates proof by respondent difficulties of faced in this case. Certainly plaintiff in this case, as in all tort cases involv- ing damage to business, must demonstrate that he suffered a merely harm the tort, and not external market generally conditions. See Prosser & Keeton at 1014- (gathering 1015,and authorizing liability nn. 92-99 cases “depriv[e] torts that pros- of customers or other pects”); cf. Dura Pharmaceuticals, Broudo, Inc. v. 544 U. S. and provable wrong or violation of contract appears, alleged but the loss or as a result of it cannot be certainly shown.” Sutherland 94. *15 468 (2005) (“[A]n purchase price itself will not inflated
336, loss,” proximately the economic cause relevant or constitute actually price that that it the inflated absent evidence was harm). alleged Ideal, Na- But the facts as under caused prices, need generally so the its Court tional did not lower “any ante, that inquire at reasons,” number of not into charging simply might it Instead, so.5 ceased have done it allegedly, logically, it had and because sales, on cash tax accordingly reporting not itself those was ceased sales App. to paying Nor is it fatal tax on 11-13. sales them. proof damages could have continued Ideal’s that National charge taxes to its customers invested the additional to actually money Ante, at 459. Had National elsewhere. damages might it to ascertain the suf- so, done be difficult mere fered as a result of that investment. But the Ideal fact that could have committed tax fraud without National readily injury that its ascertainable to Ideal does mean necessarily readily tax fraud no ascertainable undoubtedly correct Likewise, in this the case. Court “Ideal’s have resulted from factors other that lost sales could petitioners’ alleged However, Ibid. than acts fraud.” through means scheme carried the which the fraudulent was charged tax sales, out—with tax on noncash no sales but charged damages the ascertain- on cash sales—renders more typical any event, than of lost business. In able case expertise is well of a court to evaluate within district testimony portion of determine what and evidence and require prove Nor is it to that the tort caused fair to al prices complaint Ideal’s lowering stage. at the motion to dismiss petitioners “pass tax ‘sav leges that on to National’s customers sales 16. App. realizes result of its false returns.” ings’ National as a matter, that, charge was allegation This as a factual National able price permit lower tax because fraud suffices to Ideal to survive after of its due question prices a motion to on the whether were lowered dismiss fraud, to the factors. opposed as other prices
Ideal’s lost sales are attributable to National’s lower portion and what to other factors. gave
The Court also relies on an additional reason Holmes “[t]he limiting recovery namely, to direct victims— requirement especially of a direct causal connection is war- alleged ranted where the immediate victims of an vio- expected by pursuing lation can be vindicate laws (citing their Ante, Holmes, S., own claims.” at 460 503 U. 269-270). Certainly, New York can sue here and vindicate *16 rendering respondent’s law, enforcement of law less necessary respondent than it if would be were the direct illegal activity. recognition victim of the But our in Holmes limiting recovery that to direct victims would not undermine support any deterrence does not the conclusion that victim unnecessary whose lawsuit is for deterrence is an indirect any possible multiple Indeed, victim. in tort with ease plaintiffs, single plaintiff’s a lawsuit could suffice to vindi- multiple plaintiffs cate law. If are direct victims of a unjust tort, it would be some of their lawsuits declare unnecessary any doing deterrence, for absent basis for so respondent’s injuries the relevant re- statute. Because petitioners’ inju- sult from and not from York’s fraud, New respondent right equal ries, has a to recover to that of New York.
Application principles proximate causa- of common-law beyond requirement supports tion the directness likewise finding sufficiently pleaded in this case. causation was Though “one of the Holmes Court noted that directness was evaluating [the] causa- central elements” it had considered proximate “many recognized it causation took tion, shapes” Id., 268, at common at 269. Cf. Prosser & law. contrasting legal (noting Keeton at 273 “two theories 42, beyond, scope extending liability one not “the cause,” to, but ” extending liability risks,’ of the and the other ‘foreseeable consequences beyond, “‘directly all traceable’” to, but foreseeable).6 consequences The that are and those indirect that “a defend- proximate-cause serves to ensure limitation beyond anything ordi- natural, for ant is not answerable consequences nary of his conduct.” Suther- and reasonable something happens concur with “If fault land 57. one’s likely extraordinary, foreseen, he will therefore not to be unexpected result.” Ibid. for such not be answerable historically proxi- principle, have found this courts Based on wrongful injuries causes, natural if mate for from causation probable occur,” id., that such an will act “rendered plaintiff’s injuries is the immedi- reliance 62; at where long as the reli- fraud, in an action for so cause, ate such as “reasonably prior misconduct of the ance was induced injuries where an innocent id., 62, 63; at and for defendant,” party the vic- intervenes between the tortfeasor and third party is the immediate such that the innocent third tim, injury, long tortfeasor “contributed so cause of the so as the effectually injury] regarded [the as the efficient as to be responsible cause,” id., or at concurrent and least deleted). (emphasis by limiting plaintiffs Appeals, to those Court of *17 “ targets, competitors are ‘the and intended victims of
who ” 2004) (CA2 racketeering enterprise,’ 260 251, the 373 F. 3d (CA2 (quoting Bank, A., 113, 124 Lerner Fleet N. 318 F. 3d v. 2003)), proximate-causation that falls outlined a standard reasoning having in line the behind well both with proximate-cause requirement all, at and with the traditional applications to tortfeasors who caused of this standard only through two-step process. in Court, contrast, permits liability for harms that are not a defendant to evade consequences of the de foreseeable, but the intended niay simply A so fendant’s unlawful behavior. defendant do by concocting further, a scheme under which a lawful
6 than appear Prosser and Keeton to use “direct” a broader sense §43, in Holmes. See Prosser that & Keeton adopted by the Court 273, 293-297.
471 step by required to the is inflict intentional defendant injuries injury. precludes recovery a rule for Such for morally plainly responsible which the defendant is which by easily plaintiffs. are suffered identifiable There is no basis in statute, tort, the RICO in common-law or Holmes reaching this result.
II plain language pro- Because neither the of the civil RICO precedent supports holding, vision nor our Court’s rejected. noting, must be' It is worth however, while holding present may prevent litigation Court’s in the case organized in an area far removed from the about concerns holding crime that pre- led enactment, RICO’s also recovery cludes civil compet- for losses sustained business quintessential organized activity, itors as a result of criminal Congress indisputably cases language intended its broad reach.
Congress plainly problem enacted RICO to address organized remedy general crime, and not to state-law crimi nal violations. See H. Inc. v. J. Northwestern Bell Tele (1989). phone Co.,492 U. 229, 245 S. There is some evidence, to be sure, that the drafters knew that RICO would have potential sweep broadly organized more than crime problematic. and did not find that Id., at 246-248. Never recognized private theless, the Court has that “in its civil evolving quite version, is something into different original from conception Sedima, its enactors.” (1985). S. P. R. Co., L. Imrex 479, v. 473 S. U. Judicial sentiment that civil RICO’s evolution is undesir- widespread.7 expressed able Numerous Justices have dis- 7See Rehnquist, Justice, Mary’s Remarks of the Chief L. St. J. (1989) (“I think that the time has arrived for to enact Congress amend *18 ments to civil RICO limit its to the sort of scope wrongs that are con crime, nected to organized or other for being have some reason in federal court”); Sentelle, Civil Judges’ RICO: The Perspective, Some Notes on Practice Lawyers, 145, for North Carolina 12 L. Campbell Rev. 148 472 application, of RICO’s the breadth with either
satisfaction (Marshall, joined by Blackmun, and Brennan, J., id., at 501 (“The interpretation of the dissenting) Court’s Powell, JJ., private litiga- simply quite revolutionizes statute civil RICO areas state of broad the federalization tion; validates displacement approves the and it frauds, common law of [Tjhere provisions. . . . is federal remedial well-established ap- Congress much considered, even less no indication that defines”), today gen- proved, that the or its the scheme Court vagueness outlining pro- eral the conduct it is intended joined by supra, hibit, Inc., J., H. at 255-256 J. (Scalia, Rehnquist, concurring J., JJ., C. and O’Connorand Kennedy, (“No judgment) challenge constitutional to this law has case____ present highest been raised in the That the Court any- in the land has been unable to derive from this statute thing today’s meager guidance more than bodes ill for the day challenge presented”). proposals when that Indeed, curtailing Congress; for civil RICO have been introduced example, Litigation the Private Securities Reform Act, predicate in 1995, enacted removed securities fraud as a act under amending RICO. 104-67, 107,109 Pub. L. 758, Stat. §1964(c); Legislation U. S. C. see Abrams, also Crime the Public Interest: Lessons from RICO, Civil 50 SMU (1996). L. Rev. majority case,
This like the of civil cases, has no apparent organized connection to Sedima, crime. See (quoting S., U. at 499, n. 16 an ABA Task Force determina- period tion that, over the reviewed, 9% of civil RICO “ 'allegations cases at the trial court level involved crimi- activity type generally nal professional of a associated with criminals’”). Given distance the facts of this case lie (1990) (“[E]very single district judge with whom I have discussed the sub- (and ject I’m talking in the judges dozens of district from across the coun- try) echoes the entreaty expressed in the Chief Justice’s title in The Wall Journal[, Street Courtroom, 19, 1989, Get RICO My May Cases Out of 4]”). A14, p. col.
473 prototypical organized activity from the criminal that led to tempting RICO’s it enactment, to find in the Act a limita- keep tion that will at least this and similar cases out of court. attempt The Court’s to exclude this case from the reach of civil eliminating RICO, however, succeeds in cases that lie far outside the harm RICO was intended to correct, Congress’ but also those that were at the core of concern in enacting unanimously recognized statute. The Court Sedima that principal one and, dissent, reason— Congress protect enacted RICO was to businesses reason — against competitive injury organized from id., crime. See (Marshall, dissenting) at (concluding pro- 500-523 J., that the conferring right vision plaintiffs of action on individual had “principal target... power as its the economic racketeers, legitimate businessmen”); and its toll on id., at 494-500. The unanimous view of the Sedima Court is correct. The “ sponsor precursor of a Senate to RICO noted that ‘the evil to be competitive curbed is the advantage unfair inherent in large amount organized of illicit income available to (Marshall, Id., crime.’” dissenting) (quoting 514 J., (1967)(remarks Cong. Hruska); Rec. 17999 of Sen. some em- phasis deleted); (Marshall, see also 473 S., U. at 515 J., dis- (“ senting) organized ‘When crime moves business, into a it brings techniques all the of violence and intimidation which illegal Competitors used in its eliminated businesses. are sponsored suppliers’”). Upon customers confined adding provision remedy subsequently pro- for a civil in a posed bill, Senator Hruska noted:
“‘[This] bill also creates civil remedies for the honest damaged by businessman competi- who has been unfair Despite tion from the racketeer businessman. the will- ingness apply of the courts to the Sherman Anti-Trust organized practical Act to activities, crime as a matter legitimate adequate businessman does not have civil remedies available under that This bill act. fills that ” (Marshall, dissenting) (quoting gap.’ Id., J., at 516 deleted). (1969);emphasis Cong. Rec. 6993 portion ultimately in RICO, A of these bills was included Organized IX which was attached as Title to the Crime Con- *20 Report trol The that the Title Act. Committee noted “has purpose organized as its the elimination of the infiltration of racketeering legitimate organizations operat- crime and into ing Rep. p. in interstate 91-617, commerce.” S. No. 76 (1969).
The observations' of the President’s Commission on Law Enforcement and Administration of Justice, the source of congressional much organized of the concern over crime, are chapter organized consistent with these statements. Its on “organized crime extensively noted that crime is also and deeply legitimate [I]t involved in employs business .... illegitimate monopolization, terrorism, extortion, methods— tax evasion—to drive ownership out or control lawful leadership illegal profits public.” to exact from the The (1967). Challenge Society of Crime in a Free report “[t]he noted that [organized crime] millions of dollars can legitimate throw system into the gives power economic it manipulate price of shares on the stock market, to raise price or lower the of retail merchandise, to determine whether entire industries are union or nonunion, to make easier or harder for businessmen to continue in business.” Ibid. imagine
It is not competitive injury difficult to to a busi- ness organized would result from the kind crime that Congress, Sedima, recognized and the Commission all as the principal yet concern of RICO, that would fail the Court’s proximate-cause restrictive example, organized For test. an group, running legitimate crime through business, could, persuade supplier threats of goods violence, its to sell to it goods cost, so that it price could resell those at a lower competitor drive its out of the business. Honest business- men compete, they would be engage unable to as do not
threats of violence their RICO, to lower costs. Civil if it anything give was intended to do at all, was intended to those businessmen a cause of action. Sedima, S., Cf. U. (Marshall, dissenting). just respond- at 521-522 J., Yet like ent, those businessmen would not themselves be the immedi- target target ate supplier. of the threats; the would be respondent’s injury, injury Like their would be most immedi- ately activity price caused competition, the lawful not activity threatening supplier. unlawful Accord- ingly, under the Court’s view, the honest businessman com- petitor just would be an “indirect” victim, whose was proximately caused the RICO violation.8 Civil RICO right would thus confer no to sue on the individual who did not himself suffer the threats of violence, even if the threats him harm.
As a today, plaintiffs result, after civil RICO that suffer *21 precisely the kind of adoption that motivated the provision the civil RICO will be unable to obtain If relief. compelled this result by was the text of the statute, the in- congressional terference with intent would be unavoidable. language Given that the fairly is susceptible not even of such reading, a agree I however, cannot with this frustration of congressional intent.
Ill Because I conclude sufficiently pleaded that Ideal has proximate proceed I question cause, must to the which the Court does not required reach: whether reliance is a element predicated of a RICO claim on mail or wire fraud and, if it is, whether by that plaintiff. reliance must be The Court of Appeals required, held that reliance is but that “a RICO claim may based on proven mail misrep- fraud be where the by resentations person, were relied on a third rather than 8The honest businessman would likewise fail Justice Scalia’s theory of proximate causation, because laws against threats of violence are in tended to protect threatened, those who are so parties not other that Ante, might suffer as a consequence. at 462 (concurring opinion). 476 disagree with I 262, 263. 3d, at
by plaintiff.” 373 F. my view, In required at all. that reliance conclusion particular underlying a predicate acts that the mere fact not mean happen offenses does to be fraud RICO violation also incor- fraud, is of common-law an reliance, that element porated a civil RICO claim. an element of as generally re- law that the common are correct
Petitioners showing justifiable a quired reliance before damages fraud. See Neder v. for could recover (1999); & Prosser Keeton States, 527 24-25 United U. S. plaintiffs § private confer on 105,at But RICO does not 728. engage any right act of common- who to sue defendants activity racketeering as includes, relevant fraud; instead, law [18 “any this indictable under U. S. C. case, to act which is wire, fraud) (relating (relating §] [and §] to to mail fraud).” 1961(1) III). (2000 § Supp. we ed., And have rec- ognized incorpo- these criminal fraud statutes “did Neder, rate all the of common-law fraud.” elements applies S.,U. at 24. the criminal mail fraud statute Instead, anyone intending any “having who, or devised devise executing purpose scheme or artifice to defraud ... for any attempting places such scheme or or so do, artifice any post thing office . . . matter or whatever to be or sent § delivered (similar . . .” 1341. See 1343 Postal Service . fraud). language specifically wire We have “[b]y prohibiting defraud,’ noted the ‘scheme to rather completed fraud, than the the elements of reliance would ... clearly Congress be inconsistent with the statutes enacted.” *22 at Id., 25.
Because an can commit an act mail individual indictable of engage wire fraud, or fraud even if no one relies on his he can § pattern racketeering activity, in a in of 1962, of violation proof Accordingly, disputed it be without of reliance. cannot prosecute person for such that the Government could a 1964(c)(2000 ed.), § broadly of which behavior. terms by “[a]ny person injured in his business or authorize suit permit property 1962,” reason a violation of section of brings a civil ac- no different conclusion when an individual against a tion such RICO violator. apply
It is true that decision in Holmes to our proximate-cause requirement common-law was likewise compelled by language of the our broad statute. But justified by “very decision in that was case unlikelihood Congress factually injured plaintiffs meant to allow all to S., recover.” 503 stems, U. 266. This unlikelihood in part, proximate only from the of cause, nature is which “not general liability a condition civil at common law is but shape remedy.” almost essential to and delimit a rational Systems Management, Loiselle, Inc. v. 100, 303 F. 3d (CA1 2002). light Congress’ We also decided in Holmes impose liability to decision use the same to words civil under § as it RICO had in of7 Act, Sherman 26 Stat. into implied proximate-cause which federal courts had limita- Accordingly, interpret S., tion. 503 U. at 268. to was fair language “by meaning, the broad reason of” as in all civil cases, that the violation must both be the cause-in-fact proximate plaintiff’s and the injury. cause of the provision Here, contrast, the civil action cannot be read always require on have relied the defend- general ant’s action. Reliance not a on limitation civil re- covery specialized happens tort; it “is a condition that grown up supra, have with common law Loiselle, fraud.” predicate underlying at 104. For most of the acts RICO vio- argued lations, it cannot be that the if law, common it even recognized civilly required proof such as actionable, acts (2000 III). § Supp. reliance. ed., See 1961 words, In other 1964(c) (2000 ed.) language fairly there is no that could requirement only. be read to add reliance in fraud cases any Congress isNor there reason to believe that would “racketeering activity” have defined acts indict- include able under the mail if and wire fraud it intended statutes, predicate fraud-related acts to be acts under RICO *23 478 the com- under actionable have been acts would those
when mon law. §§ 1343, nor read into be reliance cannot
Because claim. of a civil it is not an element itself, into RICO plaintiff will general case, a say in the that, to This is not predicate act relied on prove that someone have to not example, York had New part If, case. of his of fraud as respect to misrepresentation with petitioners’ not believed by petition- injured may not have been well sales, their Ideal step. In- the first faltered at would have scheme, ers’ which misrepre- ordinary recognize petitioners that “in the deed, simply as requirement functions the reliance case, sentation establishing re- necessary causation prerequisite 1964(c).” language Petitioners quired by Brief for prove proof is often used to fact that of reliance But the 29. plaintiff’s as the ele- action, cause of such an element of the reliance itself into an does not transform causation, ment of supra, Loiselle, at 104 element of the cause of action. See (“Reliance way in which fraud is the most obvious doubtless only way”). Because re- it harm, can cause but is not complaint, allege which spondent all, at its need not reliance misrepresenta- petitioners’ alleges that York relied on New App. than tions, 16, is more sufficient.
[*] [*] h: may in Congress never have that enacted RICO may have us, and tended to reach cases like the one before any great “federalize[d] law” without deal of state common far-reaching “produc[ing] these results.” Se intention of (Marshall, dissenting). But this dima, S., J., 473 U. language always ignore of the stat has refused to Court archetypal, intimidating mobster,” it “the ute to limit judiciary “[i]t recognized for the has instead Congress has private where eliminate the action in situations taking simply plaintiffs provided are not advan because applications.” 499-500. tage Id., at of it in its more difficult *24 private Today, eliminates RICO however, the Court inadvertently Congress may have in some situations actions regulated, substantially ability of civil but it limits RICO Congress’ reach that motivated enact- even those cases provision place. respectfully ment of this in the first I dissent. Breyer,
Justice in and in concurring part dissenting part. my damages remedy
In view, the civil in the Racketeer (RICO), Corrupt Organizations Influenced and Act (2000 §§ Ill), Supp. U. S. C. 1961-1968 ed. and does not cover injury by competitor legitimate claims of one where the procompetitive activity competitor immediately of another injury. causes that I believe that this is such a case and consequently would hold that RICO does not authorize the private action here at issue.
I A essentially prevent organized RICO seeks to criminals taking from operating legitimate over or businesses. Its language, scope beyond however, extends its well those cen- purposes. begins by tral listing predicate RICO certain “ ” ‘racketeering activity,’ acts, called which consist of other ranging copyright crimes, from criminal activities, the facili- gambling, tation of kidnaping, and mail arson, fraud to and 1961(1) (2000 § III). Supp. murder. ed., It then defines a “ ” ‘pattern racketeering activity’ engaging to include 1961(5) § predicate 10-year “at least period. two” acts in a (2000ed.). And it forbids certain business-related activities involving “pattern” “enterprise.” such a and an The forbid- den using “pattern activities include funds derived from a racketeering activity” acquiring, establishing, operat- or ing any enterprise, conducting any the affairs of enter- (c). prise §§ through 1962(a), pattern.” such “a RICO, statute, federal criminal foresees criminal law (2000 § enforcement ed., Federal Government. III). (2000 §1964 It also sets forth civil remedies. Supp. ed.). District courts “have and re- jurisdiction prevent 1964(a). strain § violations.” And a “in- [RICO] person in his business or reason of a jured property [RICO] violation” may damages attorney’s seek treble fees. 1964(c).
B case is a present private action. treble-damages A steel Ideal supply company, Steel, has sued a competing *25 steel supply National and company, Steel, its owners, Joseph (to and Vincent Anza whom I shall refer as “Na- collectively tional”). Ideal that says National committed mail fraud by false regularly New York filing state sales tax returns order to avoid sales tax paying that it that activity owed — amounts to a “pattern This activ- racketeering activity.” enabled ity National to lower charge without prices reducing its Ideal profit margins. National says used some of these excess to fund the profits of a new store. Both building the lower prices the new outlet attracted Ideal customers, thereby Ideal. injuring Hence, says Ideal, it was injured “in business [its] ... reason by of” violations of two RICO the provisions, that provision forbids an “enter- conducting affairs” prise’s through “pattern racketeering activity” and the that provision forbids funds investing derived from such a in an “pattern” 1964(c). §§ 1962(c), “enterprise.” (a), The before question us is whether RICO Ideal permits this bring private claim. treble-damages
II in Holmes v. Securities Investor Protection This Court, Corporation, 503 U. S. 258, 268 (1992), held that RICO’s pri- vate treble-damages provision . . . some “demanded] direct relation between the asserted injury and the injurious con- duct alleged.” Court then determined the from remote was too plaintiff case in that
alleged requirement. satisfy this injurious conduct majority as it believes insofar agree with I do at issue pattern there respect holding to the fact Holmes’ my question In here. virtually answer to dictates conduct the forbidden between “causal connection” view, the key ways, here more direct plaintiff’s in certain is, harm awas Holmes, the RICO In it in Holmes. than was bankrupt surrogate that went of broker-dealers for creditors due losing money overvalued in stocks that had been after defendant and made the RICO fraudulent statements plaintiff’s “proximate cause,” the Put in terms of others. loss) (an ordinary from the differed in kind harm creditor (securities fraud) “predicate would ordi- acts” harm that the losses). (stock-related monetary narily The harm was cause entirely of the derivative “indirect” in the sense that was actions had caused more direct harm the defendant’s steps between the there were several broker-dealers; and, (misrepresentation harm violation and the —broker-dealer ordinary business creditor losses—broker-dealer loss). failure— (lost plaintiff alleges a harm cus- Here, however, the tomers) prices directly and the that flows from the lower alleg- opening a new that were themselves outlet —actions *26 edly by activity Congress designed to for- that RICO through “pattern” “predicate (conducting a of bid a business investing a in derived from such acts” business funds and are “pattern”). links before us sense, In this the causal ante, at 464-465 in Holmes. more “direct” than those See dissenting part). concurring part and J., (Thomas, points agree majority Nonetheless, I with the that Holmes impor way. that contains That case makes clear RICO scope private rights It of action. tant limitations on the of private right specifies provide action a of that RICO does § “simply showing 1962, on that the defendant violated injured, plaintiff was a ‘but was and the defendant’s violation injury.” [the] plaintiff’s at 265-266 S., 503 U. for’ cause of omitted). (footnote very that Pointing “the unlikelihood out plaintiffs factually injured Congress to allow all meant added), (emphasis that concludes Holmes recover,” id., at phrase requirement “proximate imposes cause,” a of per- generically judicial “label[s] to limit a tools used that person’s consequences responsibility that own son’s for the recognizes It that tools seek to acts,” id., at 268. these “ justice demands, or . . what is administra- discern ‘what . Ibid, tively possible (quoting Keeton, convenient.’” W. D. Prosser and Keeton on Dobbs, Keeton, Owen, R. & D. (5th 1984)). p. explains 41, Law of ed. It also Torts “proximate specify- that cause” while “directness,” demands ing many shapes that is “directness” one “the this concept S., took at common law.” 503 U. 269. And points it law, to antitrust both as a source of RICO’s treble- damages provisions interpretation. and as aid to an their Ibid. my
In treble-damages view, “antitrust” nature of the provision’s together source, taken with both RICO’s basic objectives important implies administrative concerns, “proximate a cause “indirect,” i. is not a e., cause,” if the causal chain from forbidden act to the caused a competitor proceeds through legitimate ordinary business’ competitive activity. physical metaphor, ordinary To use a competitive competitor actions undertaken defendant cut the competitor’s direct causal link between the injuries and the forbidden acts. objective encourage basic of antitrust law is to
competitive process. particular, encourages In law compete by offering prices, prod- businesses to lower better production, systems ucts, better methods of and better g., Hovenkamp, See, e. distribution. 1 Areeda R & H. Anti- Analysis trust Principles Law: An of Antitrust and Their (2d 2000). Application pp. ¶ explain, 100a, 3-4 ed. shall As I *27 principle's suggest these permit private that RICO does not solely upon competitive action type based this of harm, e., i.
48B was able plaintiff because the defendant suffers harm a through competitive methods, normal to attract customers pro- prices, products, methods of better such as lower better systems cases, In such of distribution. duction, or better private treble- the limits that RICO’s the harm falls outside requirement damages provision’s “proximate-cause” im- poses. the harm and In such cases the distance between enabled) (or predicate acts that funded otherwise such ordinary competitive activity The harm is is too distant. not “direct.” principles suggest
At the time, same those that other types competitive injuries protective of not within their “proximate-cause” within, ambit could lie not outside, limits. example, Where, for a RICO defendant attracts customers ways illegitimate competitive g., by that involve means, e. threatening may involving violence, a claim still lie. Claims objectively target particular competi- RICO violations that g., bribing competitor, tor, e. an officialto harass a could also be actionable.
Several First, considerations lead to this conclusion. I (outside have found no case Circuit, the Second from which arose) private this case in which a court has authorized a treble-damages upon legitimate suit based no more than a (even ordinary procompetitive activity business’ where fi- act). proceeds predicate nanced of a RICO bring by ordinary Second, an effort com- harm caused petitive activity private scope within the treble- RICO’s damages provision problems action will raise serious administrability. (majority opinion); Ante, at see 458-460 supra, Holmes, also To demonstrate that a defends 269. (or price plaintiff ant’s lower to lose customers profits) hap- requires have to show what would pened sup- changed in its absence. Would customers have pliers irrespective price change because of other dif- suppliers? competing ferences in firms Would other prices? higher prices have at- have lowered their Would *28 484 industry’s prod- entry? for the new demand
tracted Would scope geographic have market, of the relevant uct, or questions changed? If To answer such based so, how? upon apportion damages actual market circumstances and to among competitors difficult the various harmed is even for plaintiffs trying trace harm to a defendants’ anti- competitive behavior. Associated Cal., Gen. Contractors of (the (1983) Carpenters, possibil- Inc. 519,542, v. 459 U. S. 544 ity “may produced by independent that harm have been fac- danger complex apportionment damages” tors” and “the of of weigh against finding requisite causal connection in an case). questions antitrust To answer such in the context of functioning better prices typically markets, where reflect competitive likely prove yet conditions, would more difficult. say,
Third, where other
underlying
victims,
victims of the
“predicate
present,
RICO
pressing
acts” are
there is no
need
provide
(here
such an action. Those alternative victims
York)
typically
State of New
“could be counted on to
bring suit for the
supra,
law’s
Holmes,
vindication.”
at 273.
They
Congress’
could thus fulfill
adopting
aim in
the civil
remedy
“turning victims]
prosecutors,
‘private
into
attor
activity.”
neys general,’
eliminating
dedicated
racketeering
(2000)
tella
Wood,
v.
(citing
My approach private would not rule out actions in such cases. Nor would it rule out three of the four men- suits *29 dissenting tioned Marshall, Sedima, Justice when he objectives. describes RICO’s It would not rule out lawsuits by injured competitors legitimate or if investors a racketeer, “uses competitors ‘[t]hreats, arson and assault to force ... out of business’ “uses arson and threats to induce honest pay protection money, purchase businessmen to or to certain goods, or “displace^]” to hire certain workers”; or an “honest investor” when he legiti- “infiltrates and obtains control of a mate through business . . . fraud” or the like. 473 S.,U. at 521, 522. approach
I concede that the competitor’s would rule out a lawsuit based on enterprise” no more than an “infiltrated operating legitimate a competi- business to a businessman’s disadvantage tive predicate because helped unlawful acts legitimate “strong business build a economic base.” recognize And I that this latter arguably kind of suit at least provided helpful would have deterrence had the view of Se- (Mar- dissenting prevailed. dima’s Justices Id., at 500-523 dissenting) (arguing shall, J., private pro- that RICO’s action vision did not authorize flowing directly suits on based harm predicate acts); (Powell, from dissenting) id., at 523-530 J., (same). prevail, But the dissent did not and the need for consequently deterrence support offers weakened reading private RICO that authorizes suits in this category.
Fifth, without this limitation, RICO enforcement and basic policy antitrust losing compet- could well collide. Firms might itive battle find bases for a RICO attack on their more competitors misrepresentations successful in claimed or even comparatively competitor. minor misdeeds Firms treble-damages might hesitate to com- that fear such suits pete vigorously, particularly industries in concentrated competitor easily traced but where where harm to a is more vigorous competition particularly the consumer’s need for strong. any tendency pull The ultimate victim of such ordinary competitive punches of course would be not the competing Although Congress business, but the consumer. treble-damages provision simple did not intend its RICO as a copy g., of the antitrust remedies, laws’ similar e. see, Se- supra, dima, at interpret there is 498-499, no sound reason to treble-damages provision Congress RICO’s as if intended to counterpart set it cross-purposes. and its antitrust For these I private reasons, would read into the treble- damages provision “proximate-cause” places limitation that provision outside the harms that are traceable to an unlawful only through act legitimate competitive a form of activity.
Ill Applying approach present this to the I case, would hold that neither of private Ideal’s counts states a RICO treble- damages legitimate claim. National is a business. Another (the private York) State of New is available. The question is whether directly Ideal a by asserts harm caused something ordinary competitive other than activity, e., i. prices, lower product, a better system, a better distribution production or a better method. (1)
Ideal’s injury second count by claims caused National’s (2) having (3) taken by customers attracted its new store part that it through profits generated financed by the tax fraud financing scheme, and the is the relevant violation. 1962(a). opening The legiti- of a distribution outlet is a competitive activity. mate opens It benefits the firm it by making it more purchase convenient for customers to supplier. from that ordinary competitive process That is all complaint the given describes. And for the reasons I have financing supra, new I believe that of a II, Part by generated store—even with funds unlawful activities—is long private not to create a cause of action as as the sufficient activity activity. legitimate competitive funded amounts to g., bringing remedies, Ideal must look for other e. the facts Attorney to the attention United States or the State York. New presents question. Ideal’s first count a more difficult It alleges that National false tax filed sales returns to the State of New York. As an action indictable under the federal mail predicate statute, fraud that action is a act under RICO. §1961(1) (2000 III). Supp. passed See ed., National these savings charging on to its cash customers not them sales thereby attracting tax, more cash customers than it would have without the Is scheme. this a form of caused, by ordinary competitive activity, not simply predi- but act cate itself? my
In question view, the answer to this is “no.” The com- plaint alleges predicate simply acts that amount to the facts “charge” “pay” that National did not or sales taxes or accu- rately “report” figures sales to the State. National did tell its pay customers, “We shall not Rather, sales taxes.” simply charged price, say, customer lower rather $100 plus than tax. $100 Consider retailer who advertises $8 pay the customer a table and adds, $100 “We all sales telling taxes.” Such a retailer is the customer that he will charge price by the customer a lower the amount of tax, implies e., i. about he, retailer, $92. retailer *31 pay taking requisite will the tax to the State, the amount paid owed the State from the the customer for the $100 item. They
The defendants here have no in done more. have price effect cut the item the amount of the sales kept money passing tax and then instead of it on to the They price savings, State. funded the cut from the but the long my point savings as view, beside is, of the source nothing legitimate. price I can find as itself is cut suggests complaint it is not. reverse the decision
For these I would reasons, Appeals on Court of both counts.