Antitrust Law Daily Wrap Up, RICO—E.D. Mich.: Real estate purchaser failed to state claims against seller, (Dec 10, 2013)

By Jody Coultas, J.D.

A property purchaser, alleging that a seller committed fraud and violated state usury laws, failed to state Racketeer Influenced and Corrupt Organizations Act (RICO) and Michigan Consumer Protection Act (CPA) claims, the federal district court in Flint, Michigan has held (Ealey v. BenjiGates Estates, LLC, December 9, 2013, Berg, T.). The purchaser’s federal RICO and consumer credit claims were dismissed with prejudice, while the fraud, unjust enrichment, civil conspiracy, and CPA claims were dismissed without prejudice.

RICO. Section 1962(c) of the federal RICO law makes it unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt. Section 1962(d) makes it unlawful for persons to conspire to violate any of the other subsections of Section 1962, including 1962(c).

The purchaser failed to allege that the property seller, BenjiGates Estates, was an enterprise engaged in or affecting interstate or foreign commerce. Even if such allegation were included in the complaint, the purchaser failed to allege that any particular person conducted or participated in the enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt. The purchaser alleged that one of the defendants was involved in establishing a land contract under which “finance charges” were paid that were usurious. However, the purchaser failed to allege that the debt was incurred in connection with the business of lending money. BenjiGates merely sold houses, on some occasions, by offering buyers the option to purchase those homes on credit.

CPA. The court rejected BenjiGates’ argument that its status as a licensed real estate broker exempted its actions from CPA liability. However, it dismissed the CPA claim for failure to allege any violation of the statute. The purchaser claimed that BenjiGates violated the CPA by misrepresenting the advantages, benefits, terms, and conditions of the sale on land contract. However, there was no allegation that BenjiGates misrepresented anything. The purchaser did not claim that BenjiGates actually told or otherwise communicated to the purchaser that the interest rate charged was not usurious.

The case is No. 13-10723.

Attorneys: Donald J. Andrews (Garlin Driscoll LLC) for Brenda Ealey. Craig A. Aronoff (Peter M. Schneiderman & Associates) for BenjiGates Estates, LLC and Elm Investment Co.

Companies: BenjiGates Estates, LLC

Cases: RICO StateUnfairTradePractices MichiganNews