Antitrust Law Daily Wrap Up, RICO—2nd Cir.: Company founder gets second crack at illegal loans scheme suit, (Apr 28, 2016)

By Greg Hammond, J.D.

The federal district court in New York City erred in considering extrinsic evidence at the motion to dismiss stage of an action alleging that various companies participated in a complex illegal loan scheme that violated the Racketeer Influenced and Corrupt Organizations Act (RICO). In vacating and remanding the lower court’s order dismissing the RICO action, the U.S. Court of Appeals in New York concluded that the extrinsic evidence was not integral to the complaint and that the appropriate time to consider the evidence would have been at the summary judgment stage of the proceedings (Goel v. Bunge, Ltd., April 28, 2016, Cabranes, J.).

Rainforest Trading Ltd. and the founder of a computer-equipment distribution company filed suit against a number of companies, alleging that the defendants violated RICO by participating in a complex scheme that involved illegal loans used to generate profits from interest-rate arbitrage. The district court granted dismissal of the RICO claims as untimely, and the plaintiffs appealed.

The appellate court agreed with the plaintiffs’ argument that the lower court erred by considering materials outside the pleadings at the motion to dismiss stage. There were two pieces of extrinsic evidence: (1) the plaintiff’s deposition testimony from an earlier action brought in New York; and (2) an affidavit submitted by the plaintiff in connection with a foreclosure proceeding in Singapore. Neither piece of extrinsic evidence, however, could be properly found to be integral to the complaint, the appellate court found. Rather, the appropriate time to consider the documents, which could be relevant to the timeliness of the RICO claims, would be on summary judgment, not a motion to dismiss, the appellate court concluded. The judgment was therefore vacated and remanded.

The case is No. 15-3023-cv.

Attorneys: Robert Sentner (Sentner Safran LLP) and Nicole F. Mastropieri (Nixon Peabody LLP) for Vikas Goel and Rainforest Trading Ltd. Wendy H. Schwartz (Binder & Schwartz LLP) and Jennifer L. Achilles (Reed Smith LLP) for Bunge, Ltd., Bunge S.A., and Grains and Industrial Products PTE Ltd. Brian Rosner (Carlton Fields Jordan Burt, P.A.) for State Bank of India.

Companies: Rainforest Trading Ltd.; Bunge, Ltd.; Bunge S.A.; Grains and Industrial Products PTE Ltd.; State Bank of India

Cases: RICO ConnecticutNews NewYorkNews VermontNews