Antitrust Law Daily Wrap Up, RICO—WDWash: Native American Tribe Lacked Standing to Assert Claims Against Real Estate Agents, (Apr 19, 2013)

By Jody Coultas, J.D.

The Stillaguamish Tribe of Indians lacked standing to state Racketeer Corrupt and Influenced Organizations Act (RICO) claims against real estate agents that helped the tribe purchase real estate and run a smoke shop, according to the federal district court in Seattle (Stillaguamish Tribe of Indians v. Nelson, April 17, 2013, Jones, R.).

David and Michele Nelson ("Nelson") and Nathan Chapman were involved in various transactions, either as investors or real estate agents, involving real estate, methadone clinics, and a smoke shop. The prices various properties were allegedly more than the assessed value of the properties, and Nelson and Chapman allegedly charged excessive commissions. The smoke shop sold counterfeit cigarettes.

To have standing, a civil RICO plaintiff must prove that (1) defendant participated in an enterprise that (2) engaged in a pattern of racketeering activity that (3) caused plaintiff an (4) injury to its business or property. A party must show that the RICO predicate offense not only was a "but for" cause of injury, but was the proximate cause as well.

Because the Tribe’s evidence of loss was shaky, the court held that the predicate acts of cigarette trafficking, money laundering, mail and wire fraud were not the proximate cause of the Tribe’s lost opportunity to legally and profitably operate the smoke shop. The Tribe argued that the injury was the loss of the opportunity to legally operate the smoke shop from 2003 to 2009. However, the court found that the assumption that the Tribe would have entered the required contract with the State to sell cigarettes ignored too many variables and was too tenuous to base the alleged injury. Therefore, the Tribe could not establish standing.

The Tribe failed to show a genuine issue of material fact as to whether the alleged predicate acts of mail and wire fraud were the proximate cause of the damages incurred from the property transactions, according to the court. The Tribe argued that it was damaged by pending property transactions, overpriced closed property transaction, and from excessive commissions. A number of steps separate the alleged mail and wire fraud from the asserted injury of paying inflated prices for the closed property transactions. With respect to the pending transactions, the court found that the Tribe failed to show that the loss of the earnest money was a direct result of the predicate acts, as opposed to market conditions, a seller’s inflated sales price, or the Tribe’s own subjective value of the property. There was also no evidence that the alleged RICO violations caused the excessive commission charges.

The case is No. C10-327 RAJ.

Attorneys: Barry Neal Mesher (Sedgwick LLP) for The Stillaguamish Tribe of Indians. Andrew David Shafer (Simburg, Ketter, Sheppard & Purdy, LLP) for David Nelson.

Companies: The Stillaguamish Tribe of Indians

Cases: RICO WashingtonNews