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Commercial Litigation and Arbitration

New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
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RICO — Nondisclosure Can Support a Mail or Wire Fraud Predicate Only If There Exists an Independent Duty to Disclose That Has Been Breached — Court May Deny Costs under Rule 54(d) to Prevailing Party But Must Explain Denial

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Eller v. EquiTrust Life Ins. Co., 2015 U.S. App. LEXIS 2717 (9th Cir. Feb. 24, 2015):

A RICO claim requires "racketeering activity (known as predicate acts)." Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005) (quoting Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996)) (internal quotation marks omitted). The racketeering activities alleged by Harrington were violations of 18 U.S.C. § 1341 (mail fraud) and 18 U.S.C. § 1343 (wire fraud). See 18 U.S.C. § 1961(1) (identifying violations of these statutes as racketeering activity).

Mail and wire fraud can be premised on either a nondisclosure or an affirmative misrepresentation. See United States v. Benny, 786 F.2d 1410, 1418 (9th Cir. 1986). A nondisclosure, however, can support a fraud charge only "when there exists an independent duty that has been breached by the person so charged." United States v. Dowling, 739 F.2d 1445, 1449 (9th Cir. 1984), rev'd on other grounds, 473 U.S. 207 (1985). "Absent an independent duty, such as a fiduciary duty or an explicit statutory duty, failure to disclose cannot be the basis of a [RICO] fraudulent scheme." Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1472 (9th Cir. 1987) (citing Dowling, 739 F.2d at 1449).

Harrington's complaint is based entirely on the language of the Annuity contract and the EquiTrust marketing materials; he makes no claim of misrepresentation by the insurance agency that sold him the Annuity. Harrington alleges three [*6]  fraudulent schemes: (1) the promise of premium bonuses; (2) the application of the Annuity's market value adjustment; and (3) the circumvention of state nonforfeiture laws. The district court found no actionable predicate acts, and we agree.

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EquiTrust argues that the district court erred by not awarding it costs as the prevailing party pursuant to Federal Rule of Civil Procedure 54(d). Although a district court has the discretion [*13]  to decline to award costs to a prevailing party, it must explain a denial. See Ass'n of Mex.-Am. Educators v. California, 231 F.3d 572, 591--93 (9th Cir. 2000) (en banc). The court here did not do so. Thus, we vacate the order denying costs and remand to allow the district court either to award costs or state its reasons for denying them. See Quan v. Computer Scis. Corp., 623 F.3d 870, 889 (9th Cir. 2010), abrogated on other grounds by Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459, 2467 (2014).

 

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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