Commercial Litigation and Arbitration

RICO — Fact that Criminal Prosecution Interrupted Racketeering Activity Irrelevant in Assessing Open-Ended Continuity

Heinrich v. Waiting Angels Adoption Servs., Inc., 2012 U.S. App. LEXIS 2390 (6th Cir. Feb. 7, 2012):

The plaintiffs are seven couples who enlisted the assistance of the Waiting Angels Adoption Services, Inc. ("Waiting Angels") in an attempt to adopt children from Guatemala. Believing that they were defrauded in the course of their adoption efforts, the plaintiffs initiated suit in federal district court on October 24, 2006, naming Waiting Angels and its two principals, Simone Boraggina and Joseph Beauvais, as defendants. ***

The third amended complaint *** allege[s] that the defendants advertised Waiting Angels's services on the internet and that the defendants' website displayed children that were advertised as available for adoption. The plaintiffs also allege that Waiting Angels was advertised as a non-profit organization, when, in reality, it was a for-profit organization.***

The plaintiffs can, however, establish open-ended continuity. "Often a RICO action will be brought before continuity can be established [by showing predicate acts spanning a substantial period of time]. In such cases, liability depends on whether the threat of continuity is demonstrated." H. J. Inc., 492 U.S. at 242. So the plaintiffs must plausibly allege that there was a threat of continuing criminal activity beyond the period during which the predicate acts were performed. Determining whether the predicate acts establish open-ended continuity requires a court to examine the specific facts of the case. Id. The threat of continuing racketeering activity need not be established, however, exclusively by reference to the predicate acts alone; rather, a court should consider the totality of the circumstances surrounding the commission of those acts. Brown, 546 F.3d at 355.

The defendants argue that because Waiting Angels was shut down as part of the criminal prosecution of the individual defendants, the enterprise currently poses no threat of facilitating continued criminal activity, and the plaintiffs, therefore, cannot establish open-ended continuity. Subsequent events are irrelevant to the continuity determination, however, because "in the context of an open-ended period of racketeering activity, the threat of continuity must be viewed at the time the racketeering activity occurred." United States v. Busacca, 936 F.2d 232, 238 (6th Cir. 1991). "The lack of a threat of continuity of racketeering activity cannot be asserted merely by showing a fortuitous interruption of that activity such as by an arrest, indictment or guilty verdict." Id.; see also Blue Cross & Blue Shield of Michigan v. Kamin, 876 F.2d 543, 545 (6th Cir. 1989) (finding that continuity was established because, if the defendant had not been caught, there was no reason to believe he would not still be submitting fraudulent insurance claims); Moon v. Harrison Piping Supply, 465 F.3d 719, 729 (6th Cir. 2006) (Moore, J., concurring) (stating that the court should not consider events that transpired after the alleged racketeering acts ended when determining whether a threat of long-term racketeering activity has been properly alleged).

Moreover, the complaint does not allege an inherently terminable scheme — a pattern of racketeering activity with a built-in ending point — that has prevented this court from finding open-ended continuity in the past. Vemco, 23 F.3d at 134 (finding no open-ended continuity where only a single scheme to defraud one plaintiff the cost of one paint system was pled); Vild v. Visconsi, 956 F.2d 560, 569 (6th Cir. 1992) (finding the plaintiff had failed to plead open-ended continuity when "the acts alleged amount[ed] at best to a breach of contract with a single customer"); Thompson v. Paasche, 950 F.2d 306, 311 (6th Cir. 1991) (finding that there was no open-ended continuity because the defendant's fraudulent scheme to sell nineteen lots of land was "an inherently short-term affair" that would end once the lots were sold). Here, there is no inherent limit to the number of couples seeking to adopt or to the number of children that the defendants could hold out as available for adoption.

At the time that the defendants committed the four predicate acts alleged here, there was no indication that their pattern of behavior would not continue indefinitely into the future. The plaintiffs have thus adequately alleged a threat of continuing criminal activity and, therefore, have sufficiently alleged a pattern of racketeering activity. See Busacca, 936 F.2d at 237-38 (finding that six predicate acts committed in a span of two-and-a-half months was sufficient to establish open-ended continuity when the manner in which the racketeering activity occurred was capable of repetition indefinitely into the future). Accordingly, because the plaintiffs have adequately alleged conduct of an enterprise committed through a pattern of racketeering activity, Sedima, 473 U.S. at 496, we find that the third amended complaint does state a claim upon which relief can be granted under 18 U.S.C. § 1962(c). Dismissal of this claim pursuant to Rule 12(b)(6) was improper.

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