RICO — Deprivation of Honest Services, Alone, ≠ Concrete Injury to Business or Property Sufficient to Confer RICO Standing

Portfolio Invs. LLC v. First Sav. Bank Nw., 2014 U.S. App. LEXIS 14361 (9th Cir. July 28, 2014):

Plaintiffs--appellants Portfolio Investments LLC, Stephen Nikolich, and Stephen's wife, Marcia Nikolich (collectively "Portfolio"), appeal from the district court's dismissal of their amended complaint with prejudice for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Portfolio alleged before the district court that the First Savings Bank Northwest ("FSB") defendants-appellees and the Tax Attorneys, Inc. defendants-appellees collectively violated the Racketeer Influenced and Corrupt  [*3] Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, by depriving Portfolio of its intangible right to honest services. The district court held that Portfolio had failed to allege statutory standing under RICO and dismissed Portfolio's amended complaint with prejudice. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

I

To state a claim under 18 U.S.C. § 1964(c), Portfolio must have established statutory standing under RICO by pleading "(1) that [its] alleged harm qualifies as injury to [its] business or property; and (2) that [its] harm was 'by reason of' the RICO violation." Canyon Cnty. v. Syngenta Seeds, Inc., 519 F.3d 969, 972 (9th Cir. 2008). Portfolio argues on appeal that its intangible right to receive honest services--of which Portfolio contends it has been deprived by FSB and Tax Attorneys' actions--suffices as a property interest for RICO statutory standing purposes. This Court has specifically held, however, that the deprivation of honest services alone "does not constitute concrete financial loss" for purposes of pleading RICO's statutory standing requirement. Ove v. Gwinn, 264 F.3d 817, 825 (9th Cir. 2001); see also United States v. Kincaid-Chauncey, 556 F.3d 923, 941 n.14 (9th Cir. 2009) ("The public's intangible right to honest services cannot be construed as 'property' traditionally understood."), abrogated on other grounds by Skilling v. United States, 561 U.S. 358 (2010). Furthermore, Portfolio's amended complaint itself never alleges that (or how) Portfolio was injured in its business or property at all. Portfolio therefore failed to plead facts demonstrating that FSB and Tax Attorneys proximately caused it to sustain injury to its business or property through a fraudulent scheme to deprive it of honest services. Because we conclude that Portfolio lacks RICO standing, we do not reach any of the other arguments raised, including whether honest-services fraud can ever serve as a predicate RICO act.

Share this article:

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email

Recent Posts

Archives