Antitrust Law Daily Wrap Up, RICO—11thCir: Mortgagee’s RICO Claims Fail Against Mortgage Company over Home Foreclosure, (Apr 18, 2013)

By Tobias J. Gillett, J.D., LL.M.

A mortgagee failed to state RICO claims against her mortgage company over its foreclosure on her home because she did not adequately allege a RICO enterprise, a pattern of racketeering activity, continuity of the activity, or an injury to business or property, the U.S. Court of Appeals in Atlanta has ruled (Dysart v. BankTrust, April 16, 2013, per curiam). The appeals court upheld the district court’s dismissal of the mortgagee’s substantive RICO and RICO conspiracy claims, and its decision to deny her leave to amend her complaint.

In August 2002, Nell Dysart purchased a home through a mortgage from BankTrust. In April 2004, Dysart filed for bankruptcy. Dysart failed to refinance her home as required for Chapter 13 bankruptcy relief, and in October 2007 BankTrust held a foreclosure sale on the residence.

Dysart filed suit against BankTrust and various related individuals, asserting violations of the RICO Act, as well as various state law claims. The district court dismissed her RICO claims, and declined to exercise jurisdiction over her state law claims. Dysart appealed.

The appeals court explained that a RICO plaintiff must prove four elements under 18 U.S.C. § 1962(c): "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Moreover, the plaintiff must show an "injury to business or property that was sustained "by reason of the substantive RICO violation.""

Enterprise. The court first found that Dysart failed to establish the existence of a RICO enterprise. She alleged only that the defendants "operated together for the common purpose of . . . divest[ing] Dysart of her home and equity therein." The court observed that, even taking this allegation as true, it "was a discrete goal accomplished in 2007," not one performed by an ongoing organization.

Pattern of racketeering activity. Dysart also failed to allege a pattern of racketeering activity, defined as two or more predicate acts committed within a ten-year period, in the court’s view. The district court had determined that Dysart had not adequately pled her alleged predicate acts of wire fraud, bank fraud, and obstruction of court orders, and she did not meaningfully challenge that ruling on appeal.

Continuity. In addition, the court found Dysart did not adequately allege a pattern of racketeering activity because she did not "show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity." She did not establish open-ended continuity because the alleged scheme to deprive her of her home could not be repeated. She also did not establish close-ended continuity because "the alleged racketeering activity was related to the settlement of a single foreclosure, and, notably, was not designed to perpetrate racketeering with respect to a series of foreclosures."

Injury to business or property. Finally, Dysart failed to allege a cognizable "injury to business or property," according to the court. Her alleged "mental anguish, emotional distress, stress, physical discomfort and associated illnesses" were "personal injuries" that could not serve as the basis of a RICO claim. Moreover, the alleged RICO violations did not cause the loss of her home, because Dysart conceded that BankTrust was entitled to foreclose on it.

Therefore, the court upheld the district court’s dismissal of her substantive RICO claim. The court also upheld the dismissal of her RICO conspiracy claim because she did not make additional allegations that would establish the defendants’ "agreement with other entities or persons to engage in the ongoing criminal conduct of an enterprise."

The court also upheld the district court’s decision to deny her leave to amend her complaint. Since she alleged only one injury to one victim, she could not establish a pattern of racketeering activity, and therefore amendment would be futile.

The case is No. 12-13653.

Attorneys: Nell Dysart pro se. John Stephen Johnson (Hand Arendall, LLC) for BankTrust.

Companies: BankTrust

Cases: RICO AlabamaNews FloridaNews GeorgiaNews