Antitrust Law Daily Wrap Up, RICO—N.D. Cal.: Class action RICO claims against Mercedes-Benz and auto dealership dismissed, (Feb 19, 2016)

By Michael Menzhuber, J.D., LL.M.

Motions by Mercedes-Benz USA LLC (MBUSA) and an automobile dealership to dismiss class action claims for violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) were granted by the federal district court in Oakland (Ferrari v. Mercedes-Benz USA, LLC, February 18, 2016, Rogers, Y.).

Steve Ferrari and other consumers brought a putative class action against MBUSA, Autobahn, Inc., David Ahlheim, and Sonic Automotive Inc. which alleged, in part, violations of RICO. Specifically, the plaintiffs asserted that the defendants falsely advertised that the original equipment manufacturer (OEM) parts would be used in repairs done at Autobahn Motors. In response, Autobahn, Inc., Ahlheim, Sonic, and MBUSA moved for dismissal.

RICO claims. The court determined that the plaintiffs sufficient stated that Autobahn conducted mail fraud because they alleged that: (1) invoices and payments for wholesale purchases of OEM and non-OEM parts were done through the mail; and (2) Autobahn published a newsletter containing false information about their use of OEM parts. The conduct of wire fraud was also sufficiently stated because the plaintiffs alleged that: (1) communications regarding Autobahn’s purchase of non-OEM parts and their sale of OEM parts to other vendors were done over the phone or by email; and (2) Autobahn’s alleged false advertising regarding their use of OEM parts was posted on both the MBUSA and Autobahn website.

However, the court found that all of the required elements for a RICO claim were not met because the plaintiffs failed to prove the existence of two distinct entities being engaged in the mail fraud and wire fraud. The plaintiffs failed to sufficiently state claims of mail fraud against MBUSA because there were no facts alleged linking it to Autobahn’s alleged mail fraud. The plaintiffs’ claim of wire fraud against MBUSA failed because the only allegation with respect to this claim was that MBUSA’s website linked to the Autobahn website. Also, the claim that MBUSA aided and abetted Autobahn’s alleged fraudulent conduct was not a claim provided for under the civil RICO statute.

The case is No. 15-CV-4379 YGR.

Attorneys: Herman Franck (Franck and Associates) for Steve Ferrari. Robert B. Hawk (Hogan Lovells US LLP) for Mercedes-Benz USA, LLC. Bruce Grant Nye (Adams Nye Becht LLP) for Autobahn, Inc.

Companies: Autobahn, Inc.; Sonic Automotive Inc.

Cases: RICO CaliforniaNews