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Anza v. Ideal Steel Supply Corp. - 547 U.S. 451, 126 S. Ct. 1991 (2006)


A Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.S. §§ 1961- 1968, plaintiff cannot circumvent the proximate-cause requirement simply by claiming that the defendant's aim was to increase market share at a competitor's expense. When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff's injuries. 


The Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C.S. §§ 1961-1968, prohibited certain conduct involving a "pattern of racketeering activity," and made a private right of action available to "any person injured in his business or property by reason of a violation" of RICO's substantive restrictions, provided that the alleged violation was the proximate cause of the injury. Respondent Ideal Steel Supply Corporation (“Ideal”) had stores in Queens and the Bronx.  Petitioner National Steel Supply, Inc. (“National”), owned by petitioners Joseph and Vincent Anza (collectively, “Anza”), had stores in the same locations and was Ideal's principal competitor. Ideal filed suit in the District Court, claiming that National failed to charge New York's sales tax to cash-paying customers allowing it to reduce its prices without affecting its profit margin. National also submitted fraudulent state tax returns to conceal the conduct, which involved committing mail and wire fraud, both forms of "racketeering activity" under RICO. Ideal, on the other hand, alleged that Anza violated § 1962(c), which forbid conducting or participating in the conduct of an enterprise's affairs through a pattern of racketeering activity. It also claimed that Anza violated § 1962(a),  which made it unlawful for a person "to use or invest" income derived from a pattern of racketeering activity in an enterprise engaged in or affecting interstate or foreign commerce and they used funds generated by the fraudulent tax scheme to open National's Bronx location, causing Ideal to lose business and market share. The District Court granted Anza’s motion to dismiss, concluding that Ideal had not shown reliance on Anza’s misrepresentations, as required in RICO mail and wire fraud claims. On appeal, the United States Court of Appeals for the Second Circuit vacated the judgment holding, with regard to the § 1962(c) claim, that a complaint alleging a pattern of racketeering activity designed to give a defendant a competitive advantage adequately pleaded proximate cause even where the scheme depended on fraudulent communications made to a third party. Thus, it held that Ideal adequately pleaded its § 1962(a) claim by alleging injury resulting from Anza’s use and investment of racketeering proceeds.


Did Anza’s alleged violation of RICO cause direct harm to Ideal?




The Supreme Court of the United States concluded that Ideal could not maintain its claim based on 18 U.S.C.S. § 1962(c). Ideal's theory was that Anza harmed it by defrauding the New York tax authority and using the proceeds from the fraud to offer lower prices designed to attract more customers. The RICO violation alleged was that Anza conducted National's affairs through a pattern of mail fraud and wire fraud. The direct victim of such conduct was the State of New York, not Ideal. It was the State that was being defrauded and the State that lost tax revenue as a result. The cause of the Ideal's asserted harms was a set of actions (offering lower prices) entirely distinct from the alleged RICO violation (defrauding the State); there was an absence of proximate causation. The fact that National committed tax fraud did not necessarily mean it would lower its prices. Furthermore, Ideal's lost sales could have resulted from factors other than National’s alleged tax fraud. The Court declined to consider the § 1962(a) claim without the benefit of the Second Circuit's proximate causation analysis. he judgment was reversed in part as to the § 1962(c) claim and vacated in part as to the § 1962(a) claim. The case was remanded for further proceedings, specifically for a proximate causation analysis.

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