Antitrust Law Daily Wrap Up, RICO—N.D. Cal.: Nationwide class of lessees certified on reconsideration, (Mar 20, 2014)

By Jody Coultas, J.D.

The federal district court in Oakland granted reconsideration of a denial of class certification and certified the proposed Racketeer Influenced and Corrupt Organizations Act (RICO) and RICO conspiracy class claims. The certified class was defined as: “All persons and businesses whose lease numbers appeared on Schedule 1” to pursue RICO and RICO conspiracy claims (Rainbow Business Solutions v. Merchant Services, Inc., March 17, 2014, Wilken, C.).

Erin Campbell alleged that the Leasing Defendants conspired with one another to defraud former lessees by collecting purported taxes that were not actually due or paid to any taxing authority. The Leasing Defendants allegedly conducted a faulty simulation to determine how much to charge the former lessees, and made or attempted to make unauthorized Automated Clearing House (ACH) deductions from merchants’ bank accounts in their efforts to collect the purported taxes.

Campbell sought reconsideration of the court’s previous order denying certification of a nationwide SKS Post-Lease Expiration class. The court had held that Campbell failed to establish that common issues of law and fact predominate with respect to the RICO and RICO conspiracy claims, and based that determination on its analysis for the Excessive Lease Amount class.

Common questions were predominate in the RICO claim on behalf of the proposed SKS Post-Lease Expiration class, according to the court. The common questions included the propriety of Leasing Defendants’ simulation to determine whether taxes were due, whether class members’ form ACH agreements authorized the deductions after their leases had expired, and whether ACH processors relied on fraudulent misrepresentations by Leasing Defendants when they processed the debits. The argument that certification should be denied because Campbell failed to prove reliance and proximate cause was dismissed as neither reliance nor proximate cause were required for certification. Whether the Leasing Defendants made fraudulent misrepresentations upon which the ACH processors relied when making or attempting to make deductions from the proposed class members’ bank accounts would resolve the issue for the entire class.

The court certified the SKS Post-Lease Expiration class to pursue its RICO and RICO conspiracy claims. Campbell satisfied the numerosity, typicality, adequacy of representation, and superiority requirements. The Leasing Defendants argued that Campbell lacked standing to pursue the RICO claim because Leasing Defendants were not able to debit any taxes or fees from her bank account. However, a plaintiff who has suffered an injury to “business or property” caused by the racketeering conduct has standing to bring a racketeering claim. Even if Campbell’s damages differed from those of many class members, the RICO claim was identical to the class’s claim. A class action would efficiently resolve the numerous legal and factual questions relevant to this class’s claims against the Leasing Defendants.

The case is No. C 10-1993 CW.

Attorneys: Adam Gutride (Gutride Safier LLP) for Rainbow Business Services, Volker Von Glasenapp, Dietz Towing Inc., and The Rose Dress Inc. Cary Donahue Sullivan (Jones Day) for Merchant Services, Inc., Universal Card, Inc. and Natl. Payment Processing. Rod Divelbiss (JRA Law Partnes LLP) for MBF Leasing LLC and Northern Funding, LLC.

Companies: Rainbow Business Solutions; Merchant Services, Inc.

Cases: RICO CaliforniaNews