Antitrust Law Daily Wrap Up, RICO—3rd Cir.: Mortgagor’s “bare allegations” insufficient to prove mail, wire fraud, (Jan 26, 2015)

By Greg Hammond, J.D.

An individual and his company that owned several properties that were foreclosed upon failed to state a federal claim under the Racketeer Influenced and Corrupt Organizations Act (RICO). In affirming the lower court’s order of dismissal, the U.S. Court of Appeals in Pittsburgh determined that the plaintiffs’ “bare allegations” fell “well short” of the particularity requirements for pleading the predicate act of mail or wire fraud (Ottilio v. Valley National Bancorp, January 22, 2015, Hardiman, T.).

Plaintiff-appellants Anthony Ottilio and his company, Ottilio Properties, LLC, filed suit against his bank and attorney, alleging that they duped him into executing cross-collateralized mortgages that allowed the bank to foreclose on all of his properties after he defaulted on one mortgage. The district court dismissed Ottilio’s 11-count complaint, finding that he failed to properly allege a predicate act of racketeering activity, and that he alleged only a single scheme, as opposed to the multiple predicate acts required by RICO. Finding that Ottilio failed to state a federal RICO claim, the court declined to exercise supplemental jurisdiction over his remaining state law claims. Ottilio appealed the dismissal order.

In support of his appeal, Ottilio argued that he properly alleged mail or wire fraud as a predicate act because innocent mailings in furtherance of a RICO scheme can satisfy that requirement. The appellate court rejected this argument, however, noting that the district court dismissed Ottilio’s case for failing to allege mail or wire fraud with any particularity, not because Ottilio only alleged an innocent mailing. The appellate court ultimately agreed with the lower court’s findings, that Ottilio failed to provide any specificity regarding: the purpose of the alleged wires or mailings; who sent them; when they were sent; or how they fit into the purported fraudulent scheme.

Ottilio’s second argument—that he successfully alleged a pattern of racketeering activity because one bank employee was convicted of accepting bribes in exchange for selling bank property at a reduced price—was equally unsuccessful. The court reasoned that without stating any facts linking that crime to the alleged RICO violations, the claim falls short of the “facial plausibility” required to withstand a motion to dismiss. The lower court’s order of dismissal was therefore affirmed.

The case number is 14-1843.

Attorneys: Kenneth J. Rosellini for Anthony V. Ottilio and Ottilio Properties LLC. Richard S. Thompson (Lowenstein Sandler) for Valley National Bancorp.

Companies: Valley National Bancorp; Ottilio Properties LLC

Cases: RICO DelawareNews NewJerseyNews PennsylvaniaNews