Antitrust Law Daily Wrap Up, RICO—9th Cir.: Dismissal of investor’s RICO, UCL claims against tax shelter organizer reversed, (Oct 23, 2014)

By Linda O’Brien, J.D., LL.M.

A federal district court erred in dismissing an investor’s claim under the Racketeer Influenced and Corrupt Organizations Act (RICO) and the California Unfair Competition Law (UCL) against a German bank and its domestic subsidiary for allegedly organizing a fraudulent tax shelter, the U.S. Court of Appeals in San Francisco has ruled in an unpublished opinion. Thus, the district court order dismissing the RICO claim was reversed; the order granting summary judgment on the UCL claim was vacated; and the case was remanded for further proceedings (Rezner v. Unicredit Bank AG, October 22, 2014, Per Curiam.).

John Rezner participated in a tax shelter organized by Unicredit Bank, a financial institution in Germany, that was later determined to be unlawful by the IRS. Rezner filed suit against Unicredit Bank and its subsidiary, Unicredit U.S. Finance LLC, asserting violations of RICO and the UCL. Rezner asserted that the defendants engaged in a scheme to defraud the United States of tax revenue through fraudulent tax shelters and caused injury to participants in those tax shelters. The federal district court’s grant of summary judgment in favor of Rezner was reversed and remanded. Subsequently, the district court dismissed Rezner’s RICO claim and granted summary judgment in favor of the defendants on his UCL claim. Rezner appealed.

RICO claims. The appellate court found that the rule of mandate did not compel the result reached by the district court. The rule of mandate provides that district courts are obligated to execute the terms of a mandate received from an appellate court and cannot vary or examine the mandate for any other purpose. Although the appellate court previously ruled that Rezner did not present sufficient evidence to prevail on his RICO claim, he should not have been barred from pursuing his claim in subsequent proceedings. The court’s earlier ruling that Rezner could not rely on an injury to the government for loss of tax revenues to establish proximate cause stills applies. However, the district court should have allowed Rezner to present additional evidence in support of his claim rather than dismissing that claim.

UCL claims. After the district court granted summary judgment to the defendants on Rezner’s UCL claim, the California Supreme Court issued its decision in Riverisland Cold Storage, Inc. v. Fresno-Madera Prod. Credit Association, 55 Cal. 4th 1169 (2013). Since the district court decision was predicated on authority that was overruled by Riverisland, the entry of summary judgment must be vacated and remanded for reconsideration, the court concluded.

The case is No. 12-16719.

Attorneys: Jennifer Jonak (Jonak Pugh LLP) for John C. Rezner. Ashley Stocks Boizelle (Gibson Dunn & Crutcher LLP) for Unicredit Bank AG and Unicredit U.S. Finance LLC.

Companies: Unicredit Bank AG; Unicredit U.S. Finance LLC

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