RICO — Complaint Conclusorily Alleging Control and Asserting a “Fanstastical Scheme” That “Defies Logic” Fails to State a Claim (Good Quote)

Petrosurance, Inc. v. Nat’l Ass’n of Ins. Comm’rs, 2013 U.S. App. LEXIS 5277 (2d Cir. Mar. 18, 2013):

Plaintiff-Appellant Petrosurance, Inc. appeals from an August 31, 2012 judgment entered pursuant to a Memorandum and Order of the United States District Court for the Southern District of New York (Buchwald, J.), dismissing this civil action brought against Defendants-Appellees National Association of Insurance Commissioners ("NAIC") and The National Conference of Insurance Guaranty Funds, Inc. ("NCIGF") pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq. On appeal, Petrosurance argues that the district court erred in dismissing the complaint, contending that it alleged plausible civil RICO claims against the defendants. ***

Having reviewed the record de novo, we agree with the district court that Petrosurance has failed to allege any facts whatsoever that would support a plausible RICO claim. The complaint alleges that the Ohio Superintendent of Insurance ("the Superintendent") wrongfully withheld approximately $14 million from Petrosurance that remained in the liquidated estate of its wholly-owned subsidiary, the Oil & Gas Insurance Company ("OGICO"), which funds Petrosurance ultimately recovered from the Superintendent in a settlement reached after several rounds of litigation. Petrosurance brings this civil RICO claim against two non-profit organizations: NAIC, a regulatory policy organization whose members are state government officials who regulate insurance; and NCIGF, a trade association whose members are property and casualty guaranty funds. The complaint asserts blithely in an entirely conclusory fashion that NAIC and NCIGF "control" state insurance regulatory officials, including the Superintendent.

The complaint's allegations are patently meritless. Without needlessly retracing the district court's reasoning in the Memorandum and Order, we observe that the complaint fails to allege (1) any predicate acts of fraud by NAIC and NCIGF that could support a charge of racketeering, or (2) any facts that plausibly suggest that they caused Petrosurance's injury by "controlling" the Superintendent or the Ohio trial court that authorized the Superintendent's plan to disburse the remainder of the estate as interest on previously allowed claims, a ruling that was later reversed. See Lerner v. Fleet Bank, N.A., 459 F.3d 273, 283 (2d Cir. 2006) (elements of civil RICO claim). We agree with the district court that Petrosurance has gone "to extraordinary lengths to construct [a] fantastical scheme, a scheme that is ripe for dismissal simply 'because it defies logic.'" Petrosurance, Inc. v. Nat'l Ass'n of Ins. Comm'rs, 888 F. Supp. 2d 491, 2012 WL 3597055, at *6 (S.D.N.Y. 2012) (quoting Nelson v. Publishers Circulation Fulfillment, Inc., No. 11 Civ. 1182, 2012 U.S. Dist. LEXIS 55238, 2012 WL 760335, at *4 (S.D.N.Y. Mar. 7, 2012)).

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