Severe Emotional Distress and Trauma ≠ RICO Injury — Parents’ Voluntary Financial Support of Adult Daughter Who Was Forced to Sign Over Her Annuity in Violation of RICO Not Proximately Caused by RICO Violation — Injury Is Derivative, Not Direct (Intimation of Different Result if Financial Support Required by Law) — RICO Injury Is Requirement for Statutory Standing (12(b)(6) Issue), Not Constitutional Standing (12(b)(1) Issue)

Goney v. SuttonPark Cap. LLC, 2023 WL 8235019 (2d Cir. Nov. 28, 2023) (unpublished):

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the July 26, 2022 judgment of the district court is AFFIRMED in part and VACATED in part and the case is REMANDED to the district court for further proceedings consistent with this order.

Following an earlier appeal of the district court’s judgment of dismissal, which resulted in this Court’s remand of the case for consideration of amendment of the complaint, see Goney v. SuttonPark Cap. LLC, No. 21-188, 2021 WL 5071867 (2d Cir. Nov. 2, 2021), Rodney and Lori Goney (the “Goneys”), along with their minor grandson T.N., appeal the judgment of the district court denying their motion for leave to amend their complaint against SuttonPark Capital LLC, SuttonPark Structured Settlements LLC (together, “SuttonPark”), and attorney Edward Stone. We assume the parties’ familiarity with the underlying facts, procedural history, and issues on appeal.

Although “[w]e generally review a district court’s denial of leave to amend for abuse of discretion,” Thea v. Kleinhandler, 807 F.3d 492, 496 (2d Cir. 2015), we review such a denial de novo when the district court denies leave to amend based on the resolution of legal issues, see Hutchison v. Deutsche Bank Sec. Inc., 647 F.3d 479, 490 (2d Cir. 2011). Here, because the district court denied the Goneys’ motion on the ground that their proposed amendments would be futile, we review de novo whether the proposed amendments would state a claim under Federal Rule of Civil Procedure 12(b)(6). See Thea, 807 F.3d at 496–97. To meet that pleading bar, a plaintiff must allege “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.

RICO Claims

In denying leave to amend, the district court found that the Goneys’ proposed amended complaint (“PAC”) failed to state a claim under the private right of action in the Racketeering Influenced and Corrupt Organizations (“RICO”) Act of 1970, 18 U.S.C. § 1964(c). As relevant here, RICO imposes two limits on which injuries can be redressed through its private right of action. First, RICO permits suit only for “economic injur[ies]”; it does not allow recovery for “personal injuries” such as bodily harm or emotional distress. See Bascuñán v. Elsaca, 874 F.3d 806, 817 (2d Cir. 2017). Second, even when a plaintiff identifies an economic injury, he must show that the defendant’s conduct was the “proximate cause” of that harm. See Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258, 268 (1992).¹

Plaintiffs have identified no injury that satisfies both requirements. With respect to T.N. – the Goneys’ minor grandson for whom Rodney Goney has power of attorney – Plaintiffs claim that he was harmed because he witnessed SuttonPark exploit his mother Lyndsy, the Goneys’ adult daughter, by abusing her sexually, pressuring her to take drugs, and thereby rendering her incapable of caring for him. See App’x at 64 (PAC ¶ 65). But the PAC alleges that T.N. suffered only “severe emotional distress and trauma,” a noncognizable personal injury under RICO. Id. The same is true for the Goneys’ allegation that SuttonPark “solicited” their murder, App’x at 73 (PAC ¶ 97), which the Goneys do not even attempt to tie to an economic harm.

The Goneys also insist that SuttonPark harmed them financially because they had to support Lyndsy and T.N. after SuttonPark strongarmed Lyndsy into signing over her annuity. See App’x at 60, 65 (PAC ¶¶ 54, 70.) But even if that harm were “economic,” Bascuñán, 874 F.3d at 817, it fails RICO’s proximate cause requirement. Indeed, RICO allows only the “direct victim” of the racketeering activity to recover. Hemi Grp., LLC v. City of New York, 559 U.S. 1, 10, 12 (2010). Thus, “a plaintiff who complain[s] of harm flowing merely from the misfortunes visited upon a third person by the defendant’s acts [is] generally said to stand at too remote a distance to recover.” Holmes, 503 U.S. at 268–69. To that end, “plaintiffs who are obligated to pay the medical expenses of another may not recover against the tortfeasor who caused the damage, because their injuries are indirect since they derive wholly from the injuries sustained by the third party.” Laborers Loc. 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F.3d 229, 237 (2d Cir. 1999). The harms the Goneys allege are clearly indirect. They complain of harm that befell Lyndsy – the direct victim – due to SuttonPark’s misconduct and maintain that they must pay to support Lyndsy. But Lyndsy is not a minor and the Goneys have no legal responsibility to support her. Though the Goneys’ choice to do so may be understandable, their derivative claims of injury flowing from that voluntary support cannot satisfy RICO’s proximate cause requirement.

***

For the reasons given above, we AFFIRM the judgment of the district court as to the RICO and malpractice claims, VACATE the judgment as to T.N.’s state-law tort claims, and REMAND the case to the district court for further proceedings consistent with this order. In the interest of judicial economy, any reinstated appeal shall be assigned to this panel pursuant to United States v. Jacobson, 15 F.3d 19, 21–22 (2d Cir. 1994). Either party may restore jurisdiction to this Court within thirty days of the entry of a final order by letter to the Clerk’s Office (attaching a copy of the relevant order) advising the Clerk that the appeal should be reinstated. In that event, no new notice of appeal or additional filing fee will be required.

Footnotes
¹	*The parties frame these inquiries as part of constitutional* standing under Rule 12(b)(1), but that is not correct. Whether a plaintiff satisfies RICO’s injury requirements bears on whether the RICO claim survives a motion to dismiss under Rule 12(b)(6), not whether the court has subject matter jurisdiction under Rule 12(b)(1).** See Lerner v. Fleet Bank, N.A., 318 F.3d 113, 129 (2d Cir. 2003); see also Am. Psych. Ass’n v. Anthem Health Plans, Inc., 821 F.3d 352, 359 (2d Cir. 2016) (“The Supreme Court has ... clarified ... that what has been called ‘statutory standing’ in fact is not a [constitutional] standing issue, but simply a question of whether the particular plaintiff ‘has a cause of action under [Rule 12(b)(6)].’ ” (quoting Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 128 (2014))).
²	There is no dispute that the PAC adequately alleges diversity jurisdiction over these claims under 28 U.S.C. § 1332, as the PAC alleges that the Goneys and Stone are citizens of different states (Pennsylvania and Connecticut) and that the amount in controversy exceeds $75,000. See App’x at 53–54 (PAC ¶ 29).
³	The Goneys’ opening brief raises only this collusion theory of malpractice and not other theories that they asserted below, including misappropriation of funds and negligence separate from collusion based on failing to bring lawsuits and missing statutes of limitations. Because the Goneys raised those theories only in their reply brief, they have abandoned those arguments on appeal. See JP Morgan Chase Bank v. Altos Hornos de Mex., S.A. de C.V., 412 F.3d 418, 428 (2d Cir. 2005).
⁴	As part of their collusion argument, the Goneys also invoke for the first time New York’s attorney misconduct statute. See Goney Br. at 39–40 (citing N.Y. Jud. Law § 487). We need not consider whether the Goneys abandoned a claim based on that statute because it too requires the sort of collusion or willful misconduct that the Goneys have failed to allege in their pleading.
⁵	Here, too, the PAC does not indicate which state’s substantive law should apply, nor did the district court address the issue when it took up the Goneys’ claims. See Md. Cas. Co. v. Cont’l Cas. Co., 332 F.3d 145, 151 (2d Cir. 2003) (“A federal court sitting in diversity applies the choice-of-law rules of the forum state.”).
⁶	Of course, even if there is federal jurisdiction, the district court may still conclude that T.N.’s allegations in the PAC fail to state a claim. See, e.g., A.M.P. v. Benjamin, 158 N.Y.S.3d 337, 342 (3d Dep’t 2021) (explaining that negligence claims premised on purely emotional harm must allege “particularized allegations” of a threat to “physical safety”); G4S Secure Sols. USA, Inc. v. Golzar, 208 So.3d 204, 208 (Fla. Dist. Ct. App. 2016) (explaining how Florida’s “impact rule” forecloses many claims that are predicated on emotional injuries).

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