Sabre/Bridge v. Phoenix Bond--Decision of June 9

I called this case Sabre in my summary because it was one of the petitioners in this case. Lead petitioner, according to the Court, is John Bridge. Hence the name of this case. In this case, the Court affirmed the Seventh Circuit 9-0 (opinion by Thomas), as I predicted, and held that a plaintiff asserting a RICO claim predicated on mail fraud need not show, either as an element of its claim or as prerequisite to establishing proximate causation, that it relied on the defendant's alleged representations. The facts of the case are summarized in my initial essay; here I will just walk through the Court's legal argument, as summarized in the Syllabus of the Decision.

Legal Argument

Here is how the argument flowed:

"In 18 U.S.C. § 1964(c), RICO provides a private right of action for treble damages to “[a]ny person injured in his business or property by reason of a violation,” as pertinent here, of § 1962(c), which makes it “unlawful for any person employed by or associated with” a qualifying enterprise “to conduct or participate ... in the conduct of such enterprise's affairs through a pattern of racketeering activity,” including “mail fraud,” § 1961(1)(B). Mail fraud, in turn, occurs whenever a person, “having devised or intending to devise any scheme or artifice to defraud,” uses the mail “for the purpose of executing such scheme or artifice.” § 1341. The gravamen of the offense is the scheme to defraud, and any “ ‘mailing ... incident to an essential part of the scheme’ ... satisfies the mailing element,” Schmuck v. United States, 489 U.S. 705, 712, 109 S.Ct. 1443, 103 L.Ed.2d 734, even if the mailing “contain[s] no false information,” id., at 715. Once the relationship among these statutory provisions is understood, respondents' theory of the case is straightforward. Petitioners nonetheless argue that because the alleged pattern of racketeering activity is predicated on mail fraud, respondents must show that they relied on petitioners' fraudulent misrepresentations, which they cannot do because the misrepresentations were made to the county. Nothing on the statute's face imposes such a requirement. Using the mail to execute or attempt to execute a scheme to defraud is indictable as mail fraud, and hence a predicate racketeering act under RICO, even if no one relied on any misrepresentation, see Neder v. United States, 527 U.S. 1, 24-25, 119 S.Ct. 1827, 144 L.Ed.2d 35; and one can conduct the affairs of a qualifying enterprise through a pattern of such acts without anyone relying on a fraudulent misrepresentation. Thus, no reliance showing is required to establish that a person has violated § 1962(c) by conducting an enterprise's affairs through a pattern of racketeering activity predicated on mail fraud. Nor can a first-party reliance requirement be derived from § 1964(c), which, by providing a right of action to “[a]ny person” injured by a violation of § 1962, suggests a breadth of coverage not easily reconciled with an implicit first-party reliance requirement. Moreover, a person can be injured “by reason of” a pattern of mail fraud even if he has not relied on any misrepresentations. For example, accepting respondents' allegations as true, they were harmed by petitioners' scheme when they lost valuable liens they otherwise would have been awarded."

Conclusion

Hence in this case the Court extended the reach of the RICO statute. It now can be used by third parties who have not been defrauded, but who have been injured by the defendant's conduct.

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