Antitrust Law Daily Wrap Up, RICO—W.D.N.Y.: Civil RICO claims arising from falsified affidavits in collection matters dismissed, (Jan 31, 2014)

By Edward L. Puzzo, J.D.

The federal district court in Rochester, New York has dismissed civil RICO claims arising from the alleged pattern of a collection agency’s obtaining default judgments based on false affidavits. (Snyder v. U.S. Equities Corp., January 27, 2014, Siragusa, C.).

Paige Marie Snyder alleged that collection agency U.S. Equities Corp., through its attorney Linda Strumpf, obtained a default judgment against her in 2004, later vacated, for a consumer debt to CitiFinancial that she did not owe. Snyder, as representative of a purported class, sought to maintain a class action against U.S. Equities, Strumpf, and others on the grounds that they similarly obtained fraudulent default judgments against other persons based on false affidavits, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), among other claims.

According to Snyder, the false affidavits presented to the court in support of the default judgment against her stated that she owed the debt and had been served with process, neither of which was true. She further alleged that she had no notice of the default judgment until 2011, when attempts were made to collect on the judgment

RICO statements. Defendants moved to dismiss the RICO claim due to Snyder’s alleged failure to file a RICO statement, as required by Rule 9 of the Local Rules of Civil Procedure, and for failure to state an actionable claim.

It was undisputed that Snyder did not comply with the aforementioned Rule 9, which alone was a basis for dismissing the RICO claims, the court stated. Further, the court agreed with defendants that the RICO claims failed on their merits.

RICO merits. In support of her RICO claim, Snyder alleged the defendants engaged in acts of mail fraud and wire fraud by using the mails to deliver a proposed default judgment and affidavit to the county court clerk and city court clerk and by using the telephone to attempt to collect the alleged debt.

Generally, in the context of civil RICO claims based on fraudulent litigation, a defendant’s use of mail and wire to conduct allegedly fraudulent “litigation activities” is insufficient to establish predicate acts of racketeering, the court explained. Allegations of malicious prosecution or abuse of process do not, on their own, suffice as predicate acts for a RICO violation, the court continued. A number of courts have considered whether serving litigation documents by mail can constitute mail fraud, the court continued, and all have rejected that possibility. Numerous courts have held that the filing of litigation, no matter how lacking in merit, does not constitute a predicate racketeering act, the court stated.

In the instant case, the scale of lawsuits in terms of number may have been greater than in some of the precedential cases, and many of the litigation activities complained of in this case were hidden from plaintiff, albeit matters of public record. However, the court was not persuaded that these facts compelled a different outcome.

Cases contrasted. The court contrasted the facts in this case from those of U.S. v. Eisen, 974 F.2d 246 (2d Cir. 1992) and Sykes v. Mel Harris and Associates, LLC, 757 F.Supp.2d 413 (S.D.N.Y. 2010). Eisen, the court stated, involved a scheme involving a number of fraudulent personal injury claims, as well as the bribery of witnesses and fabricated physical evidence. The filing of false lawsuits was only part of the conspiracy in Eisen. Here, however, the false lawsuits themselves were the entire alleged racketeering activity, which made the facts distinguishable, the court stated.

Sykes, with facts similar to the present case, found that the complaint stated a claim under the civil RICO statute. However, the decision did not explain how or why this court could reach the same result in light of established authority. Therefore, neither Eisen nor Sykes were persuasive in changing this court’s conclusion that the present civil RICO claim failed to adequately plead a pattern of racketeering activity.

The case is Civil Action No. 12-CV-6092 CJS.

Attorneys: Peter M. Hartnett (Billinson & Hartnett) for Paige Marie Snyder. Brett Alan Scher (Kaufman Dolowich Voluck & Gonzo LLP) for U.S. Equities Corp.

Companies: U.S. Equities Corp.

Cases: RICO NewYorkNews