SW Legal studies in Business

Private Cause of Action Exists for RICO Criminal Violations
Description

Supreme Court held that if a party rigged a public bidding process, thereby causing competitors to lose prospective business, the losers had a private right of action to sue under RICO. The party that rigged the bidding process was accused of engaging in mail fraud, a criminal offense, which could give rise to the suit.

Topic Criminal Law
Key Words

RICO; Private Right of Action; Mail Fraud

C A S E   S U M M A R Y
Facts

Cook County, Illinois, holds public auctions to sell tax liens on properties of delinquent taxpayers. Winning bidders give the property owner the chance to pay the back taxes, plus a penalty. If the taxpayer does not pay the taxes, the bidder then owns the property and sometimes sells it for a significant profit. To prevent one buyer from getting control of the process, the rules require each buyer to submit bids only in the real name of the buyer, not use hidden agents. Bidders must swear they are abiding by the rules. Phoenix Bond complained that Bridge had fraudulently obtained properties by violating the bidding rules. He used secret agents and lied on affidavits sent to the county that stated he did not do so. This allowed Bridge and his compatriots to gain more property at lower prices than should have been the case. Suit was brought for violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). It provides a private right of action for treble damages to “any person injured in his business or property by reason of a violation” of the Act’s criminal prohibitions. The district court dismissed the suit for lack of standing. On appeal, the Seventh Circuit Court of Appeals reversed, holding that the bidders did have a cause of action based on RICO. Bridge appealed.

Decision

Affirmed. A plaintiff asserting a RICO claim based on mail fraud, as here, need not show, as an element of the claim or as a prerequisite to establish proximate cause, that it relied on defendant’s alleged misrepresentations. Mail fraud occurs whenever a person has devised a scheme to defraud and used the mail to help execute the scheme. The fact that Phoenix Bond and other bidders may not have relied on paperwork sent by Bridge and others to the County does not mean they were not injured by such paperwork, as that was at the heart of the scheme to execute the improper bidding scheme. A person can be injured by reason of mail fraud even if he has not relied on any misrepresentation. Here, Phoenix Bond has shown that by violating the bidding rules, Bridge could have imposed real harm due to Phoenix Bond losing out on liens it may otherwise have won in the bidding process.

Citation

Bridge v. Phoenix Bond & Indemnity Co., 128 S.Ct. 2131 (Sup. Ct., 2008)

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