Antitrust Law Daily Wrap Up, RICO—3d Cir.: Beneficiary of defrauded estate lacked standing to bring civil RICO claim, (Sep 20, 2013)
By Edward L. Puzzo, J.D.
The beneficiary of an estate that had been defrauded of funds did not have standing to bring a civil RICO action against those committing the fraud because the estate itself was more directly injured and was in a better position to bring the claim, the U.S. Court of Appeals in Philadelphia has ruled (Schrager v. Aldana, September 19, 2013, Per Curiam).
Arnold Schrager alleged that his niece conspired with his sister and another party to defraud his mother’s estate of over $1 million, through a pattern of racketeering activity, thereby causing him, as a beneficiary of that estate, to suffer a direct monetary injury. The issue on appeal was whether Schrager had standing to bring a private civil action under the Racketeer Influenced and Corrupt Organizations Act (RICO).
Standing to bring civil RICO claim. In order to have standing to litigate a civil RICO claim, the appellate court explained, a plaintiff must make a showing that he suffered an injury to property and that the injury was proximately caused by the defendant’s racketeering activities. A simple causal connection between defendant’s activities and plaintiff’s injuries is not sufficient; it must be shown that the connection is proximate. The determination of whether the causal connection is proximate, as opposed to a more remote connection, is made using the factors set forth in the 1992 U. S. Supreme Court case of Holmes v. Security Investor Protection Corp., 503 U.S. 258. Those factors are: (1) the directness of the injury; (2) the ease of apportioning damages among other plaintiffs affected by the alleged violation; and (3) the possibility that others, more directly injured, could vindicate the claim.
Here, Schrager suffered a financial loss due to the diminution of the estate of which he is a beneficiary. However, the direct victim of the misconduct was the estate, not Schrager, the court concluded. It was the estate that lost value due to the fraudulent activities of the co-conspirators. Under the Holmes test, it is the estate and not Schrager that is in the better position to bring a civil RICO claim. Consequently, Schrager lacked standing to bring an individual RICO claim.
The case is Civil Action No. 13-2208.
Attorneys: Michael S. Kasanoff for Jennifer Aldana.
Cases: RICO DelawareNews NewJerseyNews PennsylvaniaNews