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The Supreme Court uses "proximate cause" to label generically the judicial tools used to limit a person's responsibility for the consequences of that person's own acts. At bottom, the notion of proximate cause reflects ideas of what justice demands, or of what is administratively possible and convenient. Accordingly, among the many shapes this concept took at common law, was a demand for some direct relation between the injury asserted and the injurious conduct alleged. Thus, a plaintiff who complains 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.
Pursuant to its authority under the Securities Investor Protection Act (SIPA), respondent Securities Investor Protection Corporation (SIPC) sought, and received, judicial decrees to protect the customers of two of its member broker-dealers. After trustees were appointed to liquidate the broker-dealers' businesses, SIPC and the trustees filed this suit, alleging, among other things, that petitioner Holmes and others had conspired in a fraudulent stock-manipulation scheme that disabled the broker-dealers from meeting obligations to customers; that this conduct triggered SIPC's statutory duty to advance funds to reimburse the customers; that the conspirators had violated the Securities Exchange Act of 1934 and regulations promulgated thereunder; and that their acts amounted to a "pattern of racketeering activity" within the meaning of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U. S. C. §§ 1962, 1961(1), and (5), so as to entitle the plaintiffs to recover treble damages, § 1964(c). The District Court entered summary judgment for Holmes on the RICO claims, ruling, inter alia, that SIPC did not meet the "purchaser-seller" requirement for standing under RICO. The Court of Appeals held the finding of no standing to be error and, for this and other reasons, reversed and remanded.
Did SIPC have a right to sue under RICO?
The Court determined that SIPC had no right to sue under RICO and that Holmes could not be held responsible for the actions of his co-conspirators. The conspirators' conduct did not proximately cause the nonpurchasing customers' injury, and the provision relied on by SIPC gave no right to sue for damages. The link was too remote between the stock manipulation alleged and the customers' harm, being purely contingent on the harm suffered by the broker-dealers.