Antitrust Law Daily Wrap Up, RICO—6th Cir.: Dismissal of homeowner’s RICO claims against municipality and bank upheld, (Nov 24, 2014)

By Linda O’Brien, J.D., LL.M.

A homeowner failed to state a plausible claim against officials of a municipality and several bank employees for illegally levying and collecting property taxes on his home in violation of the Racketeering Influenced and Corrupt Organizations (RICO) Act, the U.S. Court of Appeals in Cincinnati has ruled. Thus, a district court judgment dismissing the complaint was affirmed (Otworth v. Budnik, November 21, 2014, Moore, K.).

Clarence Otworth filed suit against several local officials of the Village of Lakewood Club, Michigan and employees of Fifth Third Bank, alleging violations of RICO, among other claims. Specifically, Otworth alleged that the Village was falsely incorporated and illegally assessing taxes on his property, and the bank was complicit in the scheme by collecting mortgage payments from him and directing portions of the payments to offset his property taxes. The district court granted the defendants’ motion to dismiss and Otworth appealed.

To properly allege a RICO claim, a plaintiff must show conduct of an enterprise thought a pattern of racketeering activity, the court explained. Otworth asserted two RICO-related injuries – physical injury from the emotional stress of being forced to pay property taxes to an unincorporated village and money damages. The court noted that in its decision in Jackson v. Sedgwick Claims Mgmt. Servs., Inc., 731 F 3d 556 (2013), physical injuries are not cognizable injuries under RICO.

In order for Otworth to recover money damages, he must show that either the Village or the bank engaged in a pattern of racketeering activity. According to the court, Otworth’s allegations of theft, unlawful threat of foreclosure, and mortgage fraud were not predicate acts under RICO. Moreover, Otworth failed to allege sufficient facts to render his allegations of mail fraud plausible.

Finally, regardless of any alleged irregularities in the Village’s initial incorporation, Otworth could not challenge its existence since the State of Michigan and community residents have acquiesced in its existence for decades. Thus, the district court did not err in granting the defendants’ motion to dismiss, the appellate court concluded.

The case is No. 14-1139.

Attorneys: Clarence Otworth, pro se. Mary Massaron (Plunkett Cooney) for Wanda Budnik.

Cases: RICO KentuckyNews MichiganNews OhioNews TennesseeNews