RICO and Twombly

From CSX Transportation, Inc. v. Meserole Street Recycling, Inc., 2008 U.S. Dist. LEXIS 61376 (E.D. Mich. Aug. 12, 2008):

In this case, the Court finds that Plaintiff has failed to "nudge [its RICO continuity] claim[] across the line from conceivable to plausible." As did Twombly, this case involves a federal statute under which there is significant risk, absent careful review at the motion-to-dismiss stage of proceedings, of plaintiffs transforming garden-variety commercial disputes into something significantly more burdensome to the opposing party simply by invoking certain labels in a complaint. Despite Plaintiff's general allegations that there was a continuous and ongoing pattern of racketeering activity in this case, and despite the invocation of other RICO language, the RICO claims must be dismissed because the complaint does not go beyond those labels and language to include sufficient factual allegations that raise a right to relief above a speculative level.

This case arises out of a routine commercial dispute involving shippers (or sellers) of a specific and defined amount of paper materials..., railroad transporters of those materials, and buyers or potential recipients of the materials. It involves a specific number of railcars, a limited number of victims, and a closed, limited period of time. Moreover, although it appears that there once was a potential market for the materials, as a practical commercial matter that market no longer exists. Basic economics and market dynamics have thus closed the window on any potential of a continuing, ongoing, open-ended scheme intended to fraudulently induce the shipment of paper materials from generators or collectors such as Meserole. The alleged conduct, which was targeted to affect at most four victims over the relatively short and closed period of between six and fourteen months, is insufficient to establish a RICO pattern. [Citations omitted.]

The allegations in the complaint do not transmute this case into a Twombly-plausible RICO claim. They simply evidence Plaintiff's endeavor to repackage closed, defined, and limited commercial wrongdoing into boxes labeled with RICO statutory language. The allegations in the complaint fail to distinguish this case in any meaningful way from most any other commercial dispute involving allegations of misrepresentation and fraud. Plaintiff's claim fails because no matter how the conduct is labeled this case involves only a readily defined, time-limited, quantity-limited commercial dispute between known parties who used standard commercial means--contracts and tarriffs--to accomplish normal, legitimate business goals. The allegations of wrongdoing arise out of things that allegedly went wrong along the way. Such allegations fall short of what is necessary to establish a properly pleaded continuity element of a RICO claim that survives a Rule 12(b)(6) motion under the Twombly test.

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