Bridge v. Phx. Bond & Indem. Co., 553 U.S. 639 (2008)

(a) 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 enter [p. 640] prise’s affairs through a pattern of racketeering activity,” including “mail fraud,” § 1961(1)(B). Mail fraud, in turn, occurs whenever a per son, “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 de fraud, and any “mailing . . . ‘incident to an essential part of the scheme’ . . . satisfies the mailing element,” Schmuck v. United States, 489 U. S. 705, 712, 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. Peti tioners nonetheless argue that because the alleged pattern of racketeer ing 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; and one can conduct the affairs of a qualifying enter prise through a pattern of such acts without anyone relying on a fraudu lent misrepresentation. Thus, no reliance showing is required to estab lish 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 recon ciled 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. Pp. 647–650.

The Racketeer Influenced and Corrupt Organizations Act (RICO or Act), 18 U. S. C. §§ 1961–1968, provides a private right of action for treble damages to “[a]ny person injured in his business or property by reason of a violation” of the Act’s criminal prohibitions. § 1964(c). The question presented in this case is whether a plaintiff asserting a RICO claim predi [p. 642] cated on mail fraud must plead and prove that it relied on the defendant’s alleged misrepresentations. Because we agree with the Court of Appeals that a showing of first-party reli ance is not required, we affirm.

Because property acquired in this manner can often be sold at a significant profit over the amount paid for the lien, the auctions are marked by stiff competition. As a result, most parcels attract multiple bidders willing to accept the lowest penalty permissible—0%, that is to say, no penalty at all. (Perhaps to prevent the perverse incentive taxpayers would have if they could redeem their property from a win ning bidder for less than the amount of their unpaid taxes, the county does not accept negative bids.) The lower limit [p. 643] of 0% creates a problem: Who wins when the bidding results in a tie? The county’s solution is to allocate parcels “on a rotational basis” in order to ensure that liens are appor tioned fairly among 0% bidders. App. 18.

Petitioners and respondents are regular participants in Cook County’s tax sales. In July 2005, respondents filed a complaint in the United States District Court for the North ern District of Illinois, contending that petitioners had fraud ulently obtained a disproportionate share of liens by violat ing the Single, Simultaneous Bidder Rule at the auctions held from 2002 to 2005. According to respondents, peti [p. 644] tioner Sabre Group, LLC, and its principal Barrett Rochman arranged for related firms to bid on Sabre Group’s behalf and directed them to file false attestations that they complied with the Single, Simultaneous Bidder Rule. Having thus fraudulently obtained the opportunity to participate in the auction, the related firms collusively bid on the same proper ties at a 0% rate. As a result, when the county allocated liens on a rotating basis,3 it treated the related firms as inde pendent entities, allowing them collectively to acquire a greater number of liens than would have been granted to a single bidder acting alone. The related firms then pur chased the liens and transferred the certificates of purchase to Sabre Group. In this way, respondents allege, petitioners deprived them and other bidders of their fair share of liens and the attendant financial benefits.

Respondents’ complaint contains five counts. Counts I–IV allege that petitioners violated and conspired to violate RICO by conducting their affairs through a pattern of rack eteering activity involving numerous acts of mail fraud. In support of their allegations of mail fraud, respondents assert that petitioners “mailed or caused to be mailed hundreds of mailings in furtherance of the scheme,” id., at 49, when they [p. 645] sent property owners various notices required by Illinois law. Count V alleges a state-law claim of tortious interfer ence with prospective business advantage.

Once the relationship among these statutory provisions is understood, respondents’ theory of the case is straightfor ward. They allege that petitioners devised a scheme to de [p. 648] fraud when they agreed to submit false attestations of com pliance with the Single, Simultaneous Bidder Rule to the county. In furtherance of this scheme, petitioners used the mail on numerous occasions to send the requisite notices to property owners. Each of these mailings was an “act which is indictable” as mail fraud, and together they constituted a “pattern of racketeering activity.” By conducting the af fairs of their enterprise through this pattern of racketeering activity, petitioners violated § 1962(c). As a result, respond ents lost the opportunity to acquire valuable liens. Accord ingly, respondents were injured in their business or property by reason of petitioners’ violation of § 1962(c), and RICO’s plain terms give them a private right of action for treble damages.

If petitioners’ proposed requirement of first-party reliance seems to come out of nowhere, there is a reason: Nothing on the face of the relevant statutory provisions imposes such a requirement. Using the mail to execute or attempt to exe cute a scheme to defraud is indictable as mail fraud, and hence a predicate act of racketeering under RICO, even if no one relied on any misrepresentation. See Neder v. United States, 527 U. S. 1, 24–25 (1999) (“The common-law re quiremen[t] of ‘justifiable reliance’ . . . plainly ha[s] no place [p. 649] in the [mail, wire, or bank] fraud statutes”). And one can conduct the affairs of a qualifying enterprise through a pat tern of such acts without anyone relying on a fraudulent misrepresentation.

Moreover, a person can be injured “by reason of ” a pattern of mail fraud even if he has not relied on any misrepresenta tions. This is a case in point. Accepting their allegations as true, respondents clearly were injured by petitioners’ scheme: As a result of petitioners’ fraud, respondents lost valuable liens they otherwise would have been awarded. And this is true even though they did not rely on petitioners’ false attestations of compliance with the county’s rules. Or, to take another example, suppose an enterprise that wants to get rid of rival businesses mails misrepresentations about them to their customers and suppliers, but not to the rivals themselves. If the rival businesses lose money as a result [p. 650] of the misrepresentations, it would certainly seem that they were injured in their business “by reason of ” a pattern of mail fraud, even though they never received, and therefore never relied on, the fraudulent mailings. Yet petitioners concede that, on their reading of § 1964(c), the rival busi nesses would have no cause of action under RICO, Tr. of Oral Arg. 4, even though they were the primary and intended victims of the scheme to defraud.

In support of this argument, petitioners point to our deci sion in Beck v. Prupis, 529 U. S. 494 (2000). There, we con sidered the scope of RICO’s private right of action for viola tions of § 1962(d), which makes it “unlawful for any person [p. 651] to conspire to violate” RICO’s criminal prohibitions. The question presented was “whether a person injured by an overt act in furtherance of a conspiracy may assert a civil RICO conspiracy claim under § 1964(c) for a violation of § 1962(d) even if the overt act does not constitute ‘racketeer ing activity.’ ” Id., at 500. Answering this question in the negative, we held that “injury caused by an overt act that is not an act of racketeering or otherwise wrongful under RICO is not sufficient to give rise to a cause of action under § 1964(c) for a violation of § 1962(d).” Id., at 505 (citation omitted). In so doing, we “turn[ed] to the well-established common law of civil conspiracy.” Id., at 500. Because it was “widely accepted” by the time of RICO’s enactment “that a plaintiff could bring suit for civil conspiracy only if he had been injured by an act that was itself tortious,” id., at 501, we presumed “that when Congress established in RICO a civil cause of action for a person ‘injured . . . by reason of ’ a ‘conspir[acy],’ it meant to adopt these well established common-law civil conspiracy principles,” id., at 504 (quoting §§ 1964(c), 1962(d); alterations in original). We specifically declined to rely on the law of criminal conspiracy, relying instead on the law of civil conspiracy:

Nor does it help petitioners’ cause that here, as in Beck, the question is not simply “what constitutes a violation of § 1962[(c)], . . . but rather the meaning of a civil cause of action for private injury by reason of such a violation.” 529 U. S., at 501, n. 6. To be sure, Beck held that a plaintiff [p. 653] cannot state a civil claim for conspiracy under § 1964(c) merely by showing a violation of § 1962(d) and a resulting injury. But in so doing, Beck relied not only on the fact that the term “conspiracy” had a settled common-law meaning, but also on the well-established common-law understanding of what it means to be injured by a conspiracy for purposes of bringing a civil claim for damages. See id., at 501–504. No comparable understanding exists with respect to injury caused by an enterprise conducting its affairs through a pattern of acts indictable as mail fraud. And even the common-law understanding of injury caused by fraud does not support petitioners’ argument. As discussed infra, at 656–657, the common law has long recognized that plaintiffs can recover in a variety of circumstances where, as here, their injuries result directly from the defendant’s fraudulent misrepresentations to a third party.

Petitioners next argue that even if Congress did not make first-party reliance an element of a RICO claim predicated on mail fraud, a plaintiff who brings such a claim must show that it relied on the defendant’s misrepresentations in order to establish the requisite element of causation. In Holmes, we recognized that § 1964(c)’s “language can, of course, be read to mean that a plaintiff is injured ‘by reason of ’ a RICO violation, and therefore may recover, simply on showing that [p. 654] the defendant violated § 1962, the plaintiff was injured, and the defendant’s violation was a ‘but for’ cause of plaintiff ’s injury.” 503 U. S., at 265–266 (footnote omitted). We none theless held that not “all factually injured plaintiffs” may recover under § 1964(c). Id., at 266. Because Congress modeled § 1964(c) on other provisions that had been inter preted to “requir[e] a showing that the defendant’s violation not only was a ‘but for’ cause of his injury, but was the proxi mate cause as well,” we concluded that § 1964(c) likewise re quires the plaintiff to establish proximate cause in order to show injury “by reason of ” a RICO violation. Id., at 268.

Proximate cause, we explained, is a flexible concept that does not lend itself to “ ‘a black-letter rule that will dictate the result in every case.’ ” Id., at 272, n. 20 (quoting Associ ated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U. S. 519, 536 (1983)). Instead, we “use[d] ‘proximate cause’ to label generically the judicial tools used to limit a person’s responsibility for the consequences of that person’s own acts,” Holmes, 503 U. S., at 268, with a particular emphasis on the “demand for some direct relation between the injury asserted and the injurious conduct alleged,” ibid.; see also Anza, supra, at 461 (“When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff ’s injuries”). The direct-relation requirement avoids the dif ficulties associated with attempting “to ascertain the amount of a plaintiff ’s damages attributable to the violation, as dis tinct from other, independent, factors,” Holmes, 503 U. S., at 269; prevents courts from having “to adopt complicated rules apportioning damages among plaintiffs removed at differ ent levels of injury from the violative acts, to obviate the risk of multiple recoveries,” ibid.; and recognizes the fact that “directly injured victims can generally be counted on to vindicate the law as private attorneys general, without any [p. 655] of the problems attendant upon suits by plaintiffs injured more remotely,” id., at 269–270.5

Petitioners’ argument is twice flawed. First, as explained above, the predicate act here is not common-law fraud, but mail fraud. Having rejected petitioners’ argument that reli ance is an element of a civil RICO claim based on mail fraud, we see no reason to let that argument in through the back door by holding that the proximate-cause analysis under RICO must precisely track the proximate-cause analysis of a common-law fraud claim. “Reliance is not a general limi tation on civil recovery in tort; it ‘is a specialized condition [p. 656] that happens to have grown up with common law fraud.’ ” Anza, 547 U. S., at 477 (Thomas, J., concurring in part and dissenting in part) (quoting Systems Management, 303 F. 3d, at 104). That “specialized condition,” whether characterized as an element of the claim or as a prerequisite to establishing proximate causation, simply has no place in a remedial scheme keyed to the commission of mail fraud, a statutory offense that is distinct from common-law fraud and that does not require proof of reliance.

Second, while it may be that first-party reliance is an ele ment of a common-law fraud claim, there is no general common-law principle holding that a fraudulent misrepresen tation can cause legal injury only to those who rely on it. The Restatement provision cited by petitioners certainly does not support that proposition. It provides only that the plaintiff ’s loss must be a foreseeable result of someone’s reli ance on the misrepresentation.6 It does not say that only those who rely on the misrepresentation can suffer a legally cognizable injury. And any such notion would be contra dicted by the long line of cases in which courts have permit ted a plaintiff directly injured by a fraudulent misrepresen tation to recover even though it was a third party, and not the plaintiff, who relied on the defendant’s misrepresenta tion.7 Indeed, so well established is the defendant’s liability [p. 657] in such circumstances that the Restatement (Second) of Torts sets forth as a “[g]eneral [p]rinciple” that “[o]ne who intentionally causes injury to another is subject to liability to the other for that injury, if his conduct is generally culpa ble and not justifiable under the circumstances.” § 870. As an illustration, the Restatement provides the example of a defendant who “seeks to promote his own interests by telling a known falsehood to or about the plaintiff or his product.” Id., Comment h (emphasis added). And the Restatement specifically recognizes “a cause of action” in favor of the in jured party where the defendant “defrauds another for the purpose of causing pecuniary harm to a third person.” Id., § 435A, Comment a. Petitioners’ contention that proximate cause has traditionally incorporated a first-party reliance re quirement for claims based on fraud cannot be reconciled with these authorities.

Nor is first-party reliance necessary to ensure that there is a sufficiently direct relationship between the defendant’s wrongful conduct and the plaintiff ’s injury to satisfy the [p. 658] proximate-cause principles articulated in Holmes and Anza. Again, this is a case in point. Respondents’ alleged injury—the loss of valuable liens—is the direct result of petitioners’ fraud. It was a foreseeable and natural consequence of peti tioners’ scheme to obtain more liens for themselves that other bidders would obtain fewer liens. And here, unlike in Holmes and Anza, there are no independent factors that ac count for respondents’ injury, there is no risk of duplicative recoveries by plaintiffs removed at different levels of injury from the violation, and no more immediate victim is better situated to sue. Indeed, both the District Court and the Court of Appeals concluded that respondents and other los ing bidders were the only parties injured by petitioners’ mis representations. App. to Pet. for Cert. 17a; 477 F. 3d, at 931. Petitioners quibble with that conclusion, asserting that the county would be injured too if the taint of fraud deterred potential bidders from participating in the auction. But that eventuality, in contrast to respondents’ direct financial injury, seems speculative and remote.

Of course, none of this is to say that a RICO plaintiff who alleges injury “by reason of ” a pattern of mail fraud can prevail without showing that someone relied on the defend ant’s misrepresentations. Cf. Field v. Mans, 516 U. S. 59, 66 (1995) (“No one, of course, doubts that some degree of reli ance is required to satisfy the element of causation inherent in the phrase ‘obtained by’ ” in 11 U. S. C. § 523(a)(2)(A), which prohibits the discharge of debts for money or property “obtained by” fraud). In most cases, the plaintiff will not be able to establish even but-for causation if no one relied on the misrepresentation. If, for example, the county had not accepted petitioners’ false attestations of compliance with the Single, Simultaneous Bidder Rule, and as a result had not permitted petitioners to participate in the auction, re spondents’ injury would never have materialized. In addi tion, the complete absence of reliance may prevent the plain [p. 659] tiff from establishing proximate cause. Thus, for example, if the county knew petitioners’ attestations were false but nonetheless permitted them to participate in the auction, then arguably the county’s actions would constitute an inter vening cause breaking the chain of causation between peti tioners’ misrepresentations and respondents’ injury.

As a last resort, petitioners contend that we should inter pret RICO to require first-party reliance for fraud-based claims in order to avoid the “over-federalization” of tradi tional state-law claims. In petitioners’ view, respondents’ claim is essentially one for tortious interference with pro spective business advantage, as evidenced by count V of their complaint. Such claims have traditionally been han dled under state law, and petitioners see no reason why Con [p. 660] gress would have wanted to supplement traditional state-law remedies with a federal cause of action, complete with treble damages and attorney’s fees, in a statute designed primarily to combat organized crime. See Anza, supra, at 471–475 (Thomas, J., concurring in part and dissenting in part); Beck, 529 U. S., at 496–497. A first-party reliance requirement, they say, is necessary “to prevent garden-variety disputes between local competitors (such as this case) from being con verted into federal racketeering actions.” Reply Brief for Petitioners 3.