Antitrust Law Daily Wrap Up, RICO—3rdCir: Ten-Month Period is Insufficient to Constitute “Pattern of Racketeering Activity” for Mortgage Borrower’s RICO Claims, (Jun 13, 2013)

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

A mortgage borrower failed to state RICO claims against defendants involved in allegedly improper assignment of rents from his rental properties because the ten-month period of illicit conduct that he alleged was too short to constitute a “pattern of racketeering activity” for RICO purposes, the U.S. Court of Appeals in Philadelphia has ruled (Battiste v. Arbors Management, Inc., June 12, 2013, Per Curiam).

Albert Battiste took out loans secured by junior mortgages on his rental properties. Battiste alleged that the loans were paid off but improperly reflected in county records, and that his lender wrongfully exercised its right to assignment of rents from Battiste’s tenants because his loans had been paid off and the rents were not used to pay expenses related to the properties. Battiste filed a variety of claims, including claims for RICO violations based on acts of mail fraud, money laundering, and tax evasion. The district court dismissed the RICO claim, and Battiste appealed.

The appeals court explained that a RICO plaintiff must allege “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” “[A] pattern of racketeering activity must include the commission of at least two acts of racketeering activity that are related and create a threat of continued criminal activity,” the court stated. Alleged acts that occur in a specific, closed period of time must take place over a “substantial” time period. The court cited its 1991 decision in Hughes v. Consol-Pa. Coal Co., 945 F.2d 594, in which the court held that a twelve-month period was too short.

Here, Battiste only alleged activities occurring over a ten-month period, with no allegations of any “additional or continuing criminal acts outside the period.” Since ten months was too short to constitute a “substantial” time period, Battiste failed to allege a pattern of racketeering activity, in the court’s view.

The case is No. 12-1355.

Attorneys: Mark B. Peduto (Peduto & Associates) for Albert Battiste. William G. Merchant (Papernick & Gefsky) for Arbors Management, Inc.

Companies: Arbors Management, Inc.; EQT Investments, Inc.

Cases: RICO DelawareNews NewJerseyNews PennsylvaniaNews