Lerner v. Fleet BankLerner v. Fleet Bank
- Reporters:
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- Before:
- Straub, Sotomayor, Goldberg
SOTOMAYOR, Circuit Judge.
The creative pleading in the instant cases serves as a reminder why the Racketeer Influenced and Corrupt Organization Act‘s (“RICO“) treble damages provisions are not available to remedy every possible injury that can, with some ingenuity, be
We hold that lack of RICO standing does not divest the district court of jurisdiction over the action, because RICO standing, unlike other standing doctrines is sufficiently intertwined with the merits
BACKGROUND
In reviewing the district court‘s dismissal under either
To convince wary investors that their money would be secure, Schick agreed to deposit the entrusted funds in escrow accounts covered by restrictive provisions. Lerner v. Fleet Bank, N.A., 146 F.Supp.2d 224, 225-27 (E.D.N.Y.2001). He also entered into escrow agreements with the investors that stated: “Escrow Agent are attorneys [sic] admitted to practice in the State of New York and shall act as fiduciary in accordance with the relevant provisions of the Judiciary Law and all other ethical or legal standards for attorneys admitted to practice in the State of New York and expressly agrees that the only person who shall be entitled to, or have any right or interest in the Escrow Deposit shall be the Depositor.” Armed with these guarantees, and relying on the fact that Schick was an attorney in good standing with the New York bar, the investors turned their money over to Schick for deposit in the defendant banks. Ultimately, however, these escrow agreements provided little protection against Schick‘s unscrupulous conduct. Before the investors
Some of these defrauded investors pursued a federal RICO action against Fleet Bank, alleging that Fleet Bank had aided Schick in stealing their money by approving withdrawals that violated restrictive provisions on the accounts; failing to inform state banking authorities or investors of the fraud; misleading investors regarding their accounts; approving overdrafts on these accounts; and submitting to investors a fraudulent report overstating the balances of the main escrow accounts. Schmidt v. Fleet Bank, 16 F.Supp.2d 340, 344-45 (S.D.N.Y.1998). The district court dismissed these claims both for failure to plead an enterprise adequately and for failure to plead that Fleet had directed the affairs of an enterprise. Id. at 346-51.
Constrained by this prior dismissal, plaintiffs in the instant RICO actions proceed under a more creative theory of liability. During the three-year period in which Schick operated his scheme, Schick drew over 500 checks from investor accounts at times when there were insufficient funds to cover the checks.2 Defendants extended Schick approximately $125 million in overdrafts. After a time, they began to dishonor his checks. These dishonored checks lie at the heart of this action.
Under New York‘s Disciplinary Code, “[a] lawyer who is in possession of funds belonging to another person incident to the lawyer‘s practice of law, shall maintain such funds in a banking institution within the State of New York which agrees to provide dishonored check reports” to the Lawyer‘s Fund for Client Protection of the State of New York (“Lawyer‘s Fund“).
Plaintiffs nonetheless allege that at the time of the events in question, each of the defendant banks had entered into reporting agreements with the Lawyer‘s Fund, as provided for by
Plaintiffs claim that defendants are part of an enterprise plaintiffs term the “New York State Attorney Disciplinary System.” This association-in-fact enterprise purportedly also consists of the Appellate Division of the Supreme Court of the State of New York (“Appellate Division“), the Departmental Disciplinary Committee (“DDC“) or the Departmental Grievance Committee (“DGC“) of each judicial department with jurisdiction over Schick, and the Lawyer‘s Fund. The alleged purpose of this enterprise is to enforce New York‘s attorney disciplinary regulations with respect to an attorney‘s handling of client funds. According to plaintiffs, defendant banks play a “gate-keeper” role by reporting dishonored checks to the Lawyer‘s Fund. When the Lawyer‘s Fund receives a dishonored check report, it forwards the report to the
Plaintiffs allege that defendants set out to corrupt this enterprise by avoiding the reporting requirements. The complaints assert that the banks feared that if Schick were disciplined or disbarred, he would default on the millions of dollars he owed them, they would lose his future business, and they might potentially be subject to claims by defrauded investors. To avoid this worst-case scenario, defendants purportedly chose not to submit dishonored-check reports to the Lawyer‘s Fund. Plaintiffs further allege that defendants committed several predicate acts of mail and wire fraud in furtherance of this scheme by: stamping dishonored checks “refer to maker” rather than “insufficient funds” and returning those bounced checks to the payees, including plaintiffs, through the mail; mailing bank statements to Schick that neglected to mention the dishonored checks; and reassuring some of those notified of the dishonored checks that the checks had been dishonored because of a computer glitch or because the check had been written on the wrong account. Plaintiffs also allege that defendants transported stolen merchandise, although it is unclear from the complaint how this predicate offense was in furtherance of defendants’ alleged scheme against the Lawyer‘s Fund.
Plaintiffs’ theory of causation is equally novel. Plaintiffs claim that, by failing to report the bounced checks to the Lawyer‘s Fund as required by New York regulations, defendants prevented the New York State Attorney Discipline System from taking action against Schick. Had the Lawyer‘s Fund been informed that Schick was improperly overdrawing funds from his clients’ escrow accounts, the Appellate Division would have immediately suspended or disbarred him from the practice of law; this would have led plaintiffs, the investors, to distrust Schick and discontinue their investments, thus sparing millions of dollars in losses.
Defrauded investors bring these two companion suits, Lerner and Bayroff, against defendants, alleging violations of
Defendants moved to dismiss the RICO claims in both complaints, alleging that plaintiffs had failed to plead, inter alia, the mail and wire fraud predicate acts with the requisite particularity, a RICO enterprise, or a pattem of racketeering activity. Defendants also argued that plaintiffs lacked standing to bring a RICO action. The district court consolidated the actions for purposes of resolving defendants’ motions. Lerner, 146 F.Supp.2d at 225 n. 1. The district court then dismissed the actions for lack of subject matter jurisdiction pursuant to
DISCUSSION
The district court dismissed plaintiffs’ RICO claims pursuant to
I. RICO Standing
The RICO statute grants standing to “[a]ny person injured in his business or property by reason of a violation of section 1962 ....”
We have previously implied that there might be an additional standing component — that the plaintiff must fall within the zone of interests RICO seeks to protect. See Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F.3d 229, 236 (2d Cir.1999). “[T]he zone of interests test . . . is an inquiry `into whether . . . the plaintiff is within the class of persons sought to be benefited by the provision at issue.‘” Id. (quoting Holmes, 503 U.S. at 287, 112 S.Ct. 1311 (Scalia, J., concurring)).
While the zone-of-interests test may indeed be relevant to determining statutory standing, it is unclear precisely how this test would apply under the complex structure of the RICO statute. A RICO violation encompasses not only a violation of § 1962, but also violations of the underlying statutes that constitute the array of predicate acts. In addition, in this case, plaintiff‘s RICO violation also encompasses the alleged corruption of New York‘s regulatory system for disciplining lawyers. The district court relied upon its determination that plaintiffs did not fall within the zone of interests of the reporting regulations for this system in dismissing plaintiffs’ RICO claim for lack of standing. Lerner, 146 F.Supp.2d at 231. Whether a plaintiff must fall within the zone of interests of both RICO and the underlying statutes and regulations in order to pursue a RICO action is a question we have not yet answered.
Both the Supreme Court in Holmes and this Circuit in Powers v. British Vita, P.L.C., 57 F.3d 176, 188 (2d Cir.1995), have been squarely confronted with the issue, and both courts have found it wiser to resolve those cases on grounds of proximate causality. In Holmes, the Supreme Court granted certiorari to consider whether “a party which was neither a purchaser nor a seller of securities, and for that reason lacked standing to sue under Section 10(b) of the Securities Exchange Act of 1934 and
Four concurring Justices wrote separately to express their views on the question on which certiorari had been granted. Justice O‘Connor, joined by Justices White and Stevens, reasoned that standing under § 1964(c) focuses only on the “injury” of any person, not on the legal right of such plaintiff to sue for violations of the predicate acts. Id. at 280, 112 S.Ct. 1311 (O‘Connor, J., concurring). Justice O‘Connor therefore concluded that RICO does not incorporate the standing requirements of the predicate acts alleged. Id.
Justice Scalia also concurred in the result reached by the majority, but rejected the positions taken by Justice O‘Connor and the majority regarding the RICO standing requirement. Justice Scalia instead argued that, for a plaintiff to have standing to pursue a RICO action, he or she must satisfy the traditional elements of statutory standing of the predicate statutes, thereby demonstrating the proper nexus between the injuries alleged and the predicate acts. Id. at 288-89, 112 S.Ct. 1311 (Scalia, J., concurring). These requirements include proximate causation4 and the zone-of-interests test. Justice Scalia argued that § 1964(c) of the RICO statute did not extend the zone-of-interests protected by the underlying statutes, allowing plaintiffs to recover under RICO for a class of harms that was not encompassed within the underlying statute.5 Id. at 288, 112 S.Ct. 1311.
In Powers, this Court was similarly confronted with the question whether a plaintiff must satisfy the standing requirements of § 10(b) in order to bring a RICO claim predicated on violations of that provision. Powers, 57 F.3d at 188. After surveying the conflicting positions taken on this standing issue in the concurring opinions in Holmes, we decided to follow the Supreme Court‘s lead and, refraining from entering the fray, resolved the standing issue on the grounds of proximate causation. Id.; cf. Abrahams v. Young & Rubicam, Inc., 79 F.3d 234, 238 (2d Cir.1996).6
Although we are troubled by the issues potentially raised by the application
Plaintiffs have not demonstrated that their injury was proximately caused “by a
Second, to the extent that plaintiffs’ complaint can be read to allege that defendants engaged in a pattern of racketeering activity that led to the concealment of Schick‘s improper conduct from the Lawyer‘s Fund,9 the connection between the RICO violation and the injury alleged is too attenuated to satisfy the proximate cause requirement. “Central to the notion of proximate cause is the idea that a person is not liable to all those who may have been injured by his conduct, but only to those with respect to whom his acts were `a substantial factor in the sequence of responsible causation,’ and whose injury was `reasonably foreseeable or anticipated as a natural consequence.‘” First Nationwide Bank, 27 F.3d at 769 (quoting Hecht, 897 F.2d at 23-24); see also Laborers Local 17, 191 F.3d at 235-36. The racketeering activities alleged are not a substantial factor in the chain of causation that led to plaintiffs’ losses. Nor were those losses a reasonably foreseeable consequence of that conduct.
“The mere recitation of the chain of causation alleged by the plaintiffs is perhaps the best explanation of why they do not have standing in this case.” Newton v. Tyson Foods, Inc., 207 F.3d 444, 447 (8th Cir.2000). In order to demonstrate some link between the RICO violations alleged and the loss of their investments, plaintiffs must show that, if the defendant banks had not committed the predicate acts of mail and wire fraud, (1) unspecified third parties would have become aware that there were insufficient funds in the escrow accounts to cover Schick‘s checks; (2) the Lawyer‘s Fund, in some fashion, would
Moreover, we have repeatedly emphasized that the reasonably foreseeable victims of a RICO violation are the targets, competitors and intended victims of the racketeering enterprise. In re Am. Express Co. S‘holder Litig., 39 F.3d 395, 400 (2d Cir.1994) (holding that injury to American Express shareholders was neither the “preconceived purpose” nor the “specifically-intended consequence” of a scheme to discredit an American Express competitor); Hecht, 897 F.2d at 24 (holding that the loss of employment for failure to cooperate in RICO scheme was not proximately caused by racketeering activity because the employee was not “the target of the racketeering enterprise“); Sperber v. Boesky, 849 F.2d 60, 64 (2d Cir.1988) (holding that plaintiffs were not injured by defendant‘s racketeering activities with regard to companies whose stock the plaintiffs did not own, because any artificial increase in the price of stocks plaintiffs owned was too remote from defendant‘s illegal activities to satisfy the proximate causation requirement.).
Plaintiffs in the instant case are too far removed from the actual predicate acts committed to recover for any injuries that they suffered. The fundamental flaw in plaintiffs’ theory is plaintiffs’ allegation that defendants proceeded independently of Schick, without the purpose or design of aiding in his fraud against plaintiffs. Defendants’ goal was to “perpetrate a fraud on the attorney disciplinary system.” Lerner Compl. at ¶ 122. That alleged fraud, however, is not tied to plaintiffs’ injuries from Schick‘s fraud. Accepting plaintiffs’ allegation would mean that the Lawyer‘s Fund, not plaintiffs, was the target of defendants’ alleged racketeering enterprise. Plaintiffs’ harm is therefore an unintended and unanticipated byproduct of the banks’ alleged racketeering activities.
II. Diversity Jurisdiction
The district court declined to exercise jurisdiction over the state-law claims contained in the Lerner complaint, although diversity jurisdiction exists in the Lerner action because plaintiffs’ citizenship is diverse from defendants’ and the amount in controversy is more than $75,000. See
We know of no rule of law that requires plaintiffs to align with all other similarly injured plaintiffs before they may bring suit.10 Nor are we aware of any principle that prevents an injured party from choosing among potential co-plaintiffs based on diversity concerns. Had the Lerner plaintiffs brought their suit independently of the Bayroff plaintiffs, defendants could not argue that we lacked federal jurisdiction over the Lerner action because those plaintiffs refused to allow New York citizens to join their suit. Defendants’ argument therefore amounts to a claim that the filing of the Bayroff complaint in tandem with the Lerner complaint somehow divests the federal courts of jurisdiction. This clearly is not the case.
In determining whether the parties have improperly manufactured federal jurisdiction, the essential inquiry is whether “there is a bona fide controversy between . . . citizens of different states.” Md. Cas. Co. v. W.R. Grace & Co., 23 F.3d 617, 623 (2d Cir.1993). Selecting parties to a lawsuit based upon citizenship does not implicate this concern in the same manner as the misalignment of parties, see City of Dawson v. Columbia Ave. Sav. Fund, Safe Deposit, Title & Trust Co., 197 U.S. 178, 25 S.Ct. 420, 49 L.Ed. 713 (1905), the failure to name an indispensable party, see Envirotech Corp. v. Bethlehem Steel Corp., 729 F.2d 70, 76 (2d Cir.1984), or the collusive assignment of claims, see
III. Supplemental Jurisdiction
Plaintiffs argue that the district court should have exercised supplemental jurisdiction over the Bayroff state-law claims because they are so closely related to the Lerner claims that trying the two sets of claims together is judicially economical.
A district court may exercise supplemental jurisdiction over state-law claims “in any civil action of which the district courts have original jurisdiction,” as long as the state-law claims “are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.”
Because the requirements set forth in § 1964(c), including that a plaintiff‘s injury be proximately caused by defendants’ conduct, are often termed “RICO standing,” courts sometimes discuss them as jurisdictional requirements, akin to constitutional standing. See, e.g., Moore v. PaineWebber, Inc., 189 F.3d 165, 169 n. 3 (2d Cir.1999). But see Rent Stabilization Ass‘n v. Dinkins, 5 F.3d 591, 594 & n. 2 (2d Cir.1993) (stating that “dismissals for lack of standing may be made pursuant to
Standing generally has two aspects: constitutional standing, a mandate of the “case or controversy” requirement in Article III, and prudential considerations of standing, which involve “judicially self-imposed limits on the exercise of federal jurisdiction ....” Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). Prudential considerations include “the general prohibition on a litigant‘s raising another person‘s legal rights, the rule barring adjudication of generalized grievances more appropriately addressed in the representative branches, and the requirement that a plaintiff‘s complaint fall within the zone of interests protected by the law invoked.” Id. Finally, a related aspect of standing, statutory standing, is broadly described as a part of the prudential considerations regarding the proper limits of jurisdiction.11 See id.; Law Offices of Curtis V. Trinko, L.L.P. v. Bell Atl. Corp., 305 F.3d 89, 97 (2d Cir.2002).
It is clear that constitutional standing is a jurisdictional prerequisite to suit. See Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 101, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (“While some . . . cases must be acknowledged to have diluted the absolute purity of the rule that Article III jurisdiction is always an antecedent question, none of them even approaches approval of a doctrine of hypothetical jurisdiction that enables a court to resolve contested questions of law when its jurisdiction is in doubt.“). Issues relating to the merits of an action, almost by definition, are not jurisdictional. See id. at 89, 118 S.Ct. 1003. Although prudential considerations of standing are also generally treated as jurisdictional in nature, see, e.g., Thompson v. County of Franklin, 15 F.3d 245, 248 (2d Cir.1994), the applicability of this rule to RICO‘s statutory proximate cause requirement is less clear.12
In Steel Co., the Supreme Court noted that courts may determine whether a cause of action exists under a given statute, an issue of statutory construction that goes to the merits of the action, before addressing the zone-of-interests prudential dimension of standing, an issue the Court labeled as statutory standing. See id. at 97, 118 S.Ct. 1003; see also Nat‘l R.R. Passenger Corp. v. Nat‘l Ass‘n of R.R. Passengers, 414 U.S. 453, 465 n. 13, 94 S.Ct. 690, 38 L.Ed.2d 646 (1974) (deciding whether a statutory cause of action existed before determining whether the plaintiff met the statutory standing requirements). As the Supreme Court explained:
[T]he merits inquiry and the statutory standing inquiry often `overlap.’ The question whether this plaintiff has a cause of action under the statute, and the question whether any plaintiff has a cause of action under the statute are closely connected — indeed, depending upon the asserted basis for lack of statutory standing, they are sometimes identical, so that it would be exceedingly artificial to draw a distinction between the two.
Steel Co., 523 U.S. at 97 n. 2, 118 S.Ct. 1003 (internal citation omitted). Thus, at least in some circumstances, lack of statutory standing does not divest a district court of jurisdiction to determine the underlying merits of the action. In declining to require statutory standing as a prerequisite to jurisdiction when the merits of whether a cause of action exists are so intertwined with the statutory standing question, the Supreme Court reasoned that if “all cause-of-action questions may be regarded as jurisdictional questions, and thus capable of being decided where there is no genuine case or controversy, it is hard to see what is left of that limitation in Article III.” Id. at 93, 118 S.Ct. 1003.
In determining whether RICO‘s proximate cause requirement should be treated as jurisdictional, we take a cue from the Steel Co. Court‘s emphasis on the problem of having merits issues become jurisdictional
Returning to the particular statutory standing question before us, we note that we have previously suggested in dictum that RICO‘s causation requirement raises a jurisdictional issue. Moore, 189 F.3d at 169 n. 3 (“Because loss causation is an element of standing to sue under the RICO statute, the appropriate ground of dismissal for failure to plead loss causation would seem to be the lack of subject matter jurisdiction.“); cf. Seward v. Devine, 888 F.2d 957, 964 (2d Cir.1989) (“The exercise of pendant jurisdiction . . . should abide” the district court‘s finding with respect to RICO standing.). Still, we recognized in Moore that we have treated dismissals for lack of RICO standing as dismissals for failure to state a claim pursuant to
In this case, however, the difference between a jurisdictional bar to bringing a claim and a failure to state a claim under
In Lorazepam, the D.C. Circuit relied upon the Supreme Court‘s differentiation between antitrust standing and constitutional standing in Associated General Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983). In Associated General Contractors, the Supreme Court stated that determining “whether [plaintiff] may recover for the injury it allegedly suffered by reason of the defendants’ coercion against certain third parties . . . requires us to evaluate the plaintiff‘s harm, the alleged wrongdoing by the defendants, and the relationship between them.” Id. at 535, 103 S.Ct. 897 “The label “antitrust standing” has traditionally been applied to some of the elements of this inquiry. As
While the Lorazepam court does not make its reasoning explicit, it is consistent with the guideline articulated in Steel Co. that if statutory standing is essentially indistinguishable from the merits of the action, its absence is not a jurisdictional bar to suit, but a failure to state a claim. As Associated General Contractors emphasizes, the proximate causation requirement in antitrust standing requires a court to evaluate the merits of the action. Associated Gen. Contractors, 459 U.S. at 535, 103 S.Ct. 897; see also Ass‘n of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970) (distinguishing question whether plaintiff asserted a legal interest that was harmed by agency action from the question of standing; “[the] legal interest test goes to the merits. The question of standing is different. It concerns, apart from the `case’ or `controversy’ test, the question whether the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.“).
Similarly, the requirement that a plaintiff demonstrate proximate causation to have standing under the RICO statute goes to the merits of the action. “Where the plaintiff alleges each element of a [RICO] violation, the compensable injury necessarily is the harm caused by [the] predicate acts ....” Sedima, 473 U.S. at 497, 105 S.Ct. 3275. In evaluating whether a plaintiff has standing under RICO, the court must, as in an antitrust case, “evaluate the plaintiff‘s harm, the alleged wrongdoing by the defendants, and the relationship between them.” Associated Gen. Contractors, 459 U.S. at 535, 103 S.Ct. 897. Thus, the issue of proximate causation in the RICO standing context is sufficiently intertwined with the merits of the RICO claim that any potential distinction between statutory standing as a jurisdictional issue and the merits issue is untenable. It would change the merits issues into limitations on jurisdiction.
By implicitly addressing whether lack of statutory standing under RICO is a jurisdictional bar to suit, other courts reinforce our determination that RICO standing is not a jurisdictional issue. See, e.g., Maio v. Aetna, Inc., 221 F.3d 472, 481-82 n. 7 (3d Cir.2000) (noting that the Third Circuit‘s practice was to treat RICO and antitrust standing as non-jurisdictional, but declining to decide whether this practice was proper); DeMauro v. DeMauro, 115 F.3d 94, 96 (1st Cir.1997) (stating that whether a plaintiff has pled “a claim of `injury’ to her `business or property’ as required for a civil RICO damages action . . . is sometimes described as a `standing’ issue” and noting that “[t]here is plainly a case or controversy under Article III; but the statutory precondition of injury to business or property must also be met“); cf. Whalen v. Carter, 954 F.2d 1087, 1097 (5th Cir.1992) (“[B]ecause we have concluded that [plaintiff] might have the requisite standing to assert his RICO claims, we note that there is at least some possibility [plaintiff] could assert his state law claims under
In sum, despite describing the proximate causation requirement as “RICO standing,” such standing is not jurisdictional in nature under
Thus, Bayroff plaintiffs’ lack of statutory standing does not divest the district court of original jurisdiction over the Bayroff action. The district court had original jurisdiction to support the exercise of supplemental jurisdiction over the Bayroff plaintiffs’ state-law claims.
Having determined that the district court may exercise supplemental jurisdiction over the Bayroff state-law claims, we now turn to the prudential aspects of whether the district court should in fact do so. The factors that a district court should consider in making this decision are unchanged by our analysis above. In most circumstances, a district court should decline supplemental jurisdiction if all federal claims have been dismissed at the pleading stage. See United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). Because the district court must adjudicate identical issues in Lerner, however, judicial economy might best be served by exercising supplemental jurisdiction over the Bayroff state-law claims. Because it dismissed both the Lerner and Bayroff actions, the district court did not consider whether retaining supplemental jurisdiction over the Bayroff state-law claims might be appropriate given that it retains jurisdiction over the Lerner state-law claims. As this decision is within the district court‘s discretion, we remand the Bayroff action for its determination.
CONCLUSION
For the reasons stated, we affirm the district court‘s dismissal of plaintiffs’ RICO claims for lack of standing, but we do so under Rule 12(b)(6) for failure to state a claim rather than under Rule 12(b)(1) as the district court did. Because the district court has diversity jurisdiction over the Lerner plaintiffs’ state-law claims we vacate the dismissal of the Lerner complaint and remand for adjudication of the Lerner state-law claims. We also vacate the dismissal of the Bayroff state-law claims and remand to the district court for determination whether the exercise of supplemental jurisdiction is appropriate in this case.
Notes
Defendants point out that an attorney‘s duty to keep funds in segregated escrow accounts applies only to “[a] lawyer who is in possession of funds belonging to another person incident to the lawyer‘s practice of law....” See
Finally, plaintiffs allege that the fraud was so substantial that defendants’ report of the overdrafts and other irregularities “would have resulted in Schick‘s immediate suspension and/or disbarment” before plaintiffs’ made further investments or the funds were misappropriated. While sufficiently tenuous to fail to demonstrate proximate causation, we cannot say, taking the facts alleged in the complaint as true, that plaintiffs do not allege an injury fairly traceable to defendants’ conduct.