Bridge v. Phoenix Bond & Indem. Co.

• Citation: 553 U.S. 639,21 Fla. L. Weekly Fed. S 295,76 USLW 4381,128 S.Ct. 2131,2008 Daily Journal D.A.R. 8339,170 L.Ed.2d 1012,08 Cal. Daily Op. Serv. 6929
• Decision Date: 09 June 2008
• Docket Number: No. 07–210.,07–210.
• Court: U.S. Supreme Court
• Parties: John BRIDGE et al., Petitioners, v. PHOENIX BOND & INDEMNITY CO. et al.

08 Cal. Daily Op. Serv. 6929

128 S.Ct. 2131

170 L.Ed.2d 1012

2008 Daily Journal D.A.R. 8339

21 Fla. L. Weekly Fed. S 295

553 U.S. 639

76 USLW 4381

John BRIDGE et al., Petitioners,

v.PHOENIX BOND & INDEMNITY CO. et al.

No. 07–210.

Supreme Court of the United States

Argued April 14, 2008.Decided June 9, 2008.

Syllabus ^*

Each year the Cook County Treasurer's Office holds a public auction to sell its tax liens on delinquent taxpayers' property. To prevent any one buyer from obtaining a disproportionate share of the liens, the county adopted the “Single, Simultaneous Bidder Rule” (Rule), which requires each buyer to submit bids in its own name, prohibits a buyer from using “apparent agents, employees, or related entities” to submit simultaneous bids for the same parcel, and requires a registered bidder to submit a sworn affidavit affirming its compliance with the Rule. Petitioners and respondents regularly participate in the tax sales. Respondents filed suit, alleging that petitioners fraudulently obtained a disproportionate share of liens by filing false compliance attestations. As relevant here, they claim that petitioners violated and conspired to violate the Racketeer Influenced and Corrupt Organizations Act (RICO) through a pattern of racketeering activity involving mail fraud, which occurred when petitioners sent property owners various notices required by Illinois law. The District Court dismissed the RICO claims for lack of standing, finding that respondents were not protected by the mail fraud statute because they did not receive the alleged misrepresentations. Reversing, the Seventh Circuit based standing on the injury respondents suffered when they lost the chance to obtain more liens, and found that respondents had sufficiently alleged proximate cause because they were immediately injured by petitioners' scheme. The court also rejected petitioners' argument that respondents are not entitled to relief under RICO because they had not received, and therefore had not relied on, any false statements.

Held: A plaintiff asserting a RICO claim predicated on mail fraud need not show, either as an element of its claim or as a prerequisite to establishing proximate causation, that it relied on the defendant's alleged misrepresentations. Pp. 2137 – 2145.

(a) In 18 U.S.C. § 1964(c), RICO provides a private right of action for treble damages to “[a]ny person injured in his business or property by reason of a violation,” as pertinent here, of § 1962(c), which makes it “unlawful for any person employed by or associated with” a qualifying enterprise “to conduct or participate ... in the conduct of such enterprise's affairs through a pattern of racketeering activity,” including “mail fraud,” § 1961(1)(B). Mail fraud, in turn, occurs whenever a person, “having devised or intending to devise any scheme or artifice to defraud,” uses the mail “for the purpose of executing such scheme or artifice.” § 1341. The gravamen of the offense is the scheme to defraud, and any “ ‘mailing ... incident to an essential part of the scheme’ ... satisfies the mailing element,” Schmuck v. United States, 489 U.S. 705, 712, 109 S.Ct. 1443, 103 L.Ed.2d 734, even if the mailing “contain[s] no false information,” id., at 715, 109 S.Ct. 1443. Once the relationship among these statutory provisions is understood, respondents' theory of the case is straightforward. Petitioners nonetheless argue that because the alleged pattern of racketeering activity is predicated on mail fraud, respondents must show that they relied on petitioners' fraudulent misrepresentations, which they cannot do because the misrepresentations were made to the county. Nothing on the statute's face imposes such a requirement. Using the mail to execute or attempt to execute a scheme to defraud is indictable as mail fraud, and hence a predicate racketeering act under RICO, even if no one relied on any misrepresentation, see Neder v. United States, 527 U.S. 1, 24–25, 119 S.Ct. 1827, 144 L.Ed.2d 35; and one can conduct the affairs of a qualifying enterprise through a pattern of such acts without anyone relying on a fraudulent misrepresentation. Thus, no reliance showing is required to establish that a person has violated § 1962(c) by conducting an enterprise's affairs through a pattern of racketeering activity predicated on mail fraud. Nor can a first-party reliance requirement be derived from § 1964(c), which, by providing a right of action to “[a]ny person” injured by a violation of § 1962, suggests a breadth of coverage not easily reconciled with an implicit first-party reliance requirement. Moreover, a person can be injured “by reason of” a pattern of mail fraud even if he has not relied on any misrepresentations. For example, accepting respondents' allegations as true, they were harmed by petitioners' scheme when they lost valuable liens they otherwise would have been awarded. Pp. 2137 – 2140.

(b) None of petitioners' arguments—that under the “common-law meaning” rule, Congress should be presumed to have made reliance an element of a civil RICO claim predicated on a violation of the mail fraud statute; that a plaintiff bringing a RICO claim based on mail fraud must show reliance on the defendant's misrepresentations in order to establish proximate cause; and that RICO should be interpreted to require first-party reliance for fraud-based claims in order to avoid the “overfederalization” of traditional state-law claims—persuades this Court to read a first-party reliance requirement into a statute that by its terms suggests none. Pp. 2139 – 2145.

477 F.3d 928, affirmed.

THOMAS, J., delivered the opinion for a unanimous Court.

Theodore M. Becker, Chicago, IL, for petitioners.

David W. DeBruin, Washington, DC, for respondents.

Eric D. Miller, for the United States as amicus curiae, by special leave of the Court, supporting the respondents.Peter Buscemi, Joseph Brooks, Michelle Park Chiu, Morgan, Lewis & Bockius LLP, Washington, D.C., Theodore M. Becker, Counsel of Record, James E. Bayles, Jr., Morgan, Lewis & Bockius LLP, Chicago, Illinois, for Petitioners.Lowell E. Sachnoff, David C. Bohan, John W. Moynihan, Reed Smith LLP, Chicago, IL, Jonathan L. Marks, Katten Muchin Rosenmann LLP, Chicago, IL, David W. DeBruin, Counsel of Record, Ian Heath Gershengorn, Matthew S. Hellman, Carrie F. Apfel, Sharmila Sohoni, Jenner & Block LLP, Washington, DC, for Respondents.Justice THOMAS delivered the opinion of the Court.

The Racketeer Influenced and Corrupt Organizations Act (RICO or Act), 18 U.S.C. §§ 1961–1968, provides a private right of action for treble damages to “[a]ny person injured in his business or property by reason of a violation” of the Act's criminal prohibitions. § 1964(c). The question presented in this case is whether a plaintiff asserting a RICO claim predicated on mail fraud must plead and prove that it relied on the defendant's alleged misrepresentations. Because we agree with the Court of Appeals that a showing of first-party reliance is not required, we affirm.

I

Each year the Cook County, Illinois, Treasurer's Office holds a public auction at which it sells tax liens it has acquired on the property of delinquent taxpayers.¹ Prospective buyers bid on the liens, but not in cash amounts. Instead, the bids are stated as percentage penalties the property owner must pay the winning bidder in order to clear the lien. The bidder willing to accept the lowest penalty wins the auction and obtains the right to purchase the lien in exchange for paying the outstanding taxes on the property. The property owner may then redeem the property by paying the lienholder the delinquent taxes, plus the penalty established at the auction and an additional 12% penalty on any taxes subsequently paid by the lienholder. If the property owner does not redeem the property within the statutory redemption period, the lienholder may obtain a tax deed for the property, thereby in effect purchasing the property for the value of the delinquent taxes.

Because property acquired in this manner can often be sold at a significant profit over the amount paid for the lien, the auctions are marked by stiff competition. As a result, most parcels attract multiple bidders willing to accept the lowest penalty permissible—0%, that is to say, no penalty at all. (Perhaps to prevent the perverse incentive taxpayers would have if they could redeem their property from a winning bidder for less than the amount of their unpaid taxes, the county does not accept negative bids.) The lower limit of 0% creates a problem: Who wins when the bidding results in a tie? The county's solution is to allocate parcels “on a rotational basis” in order to ensure that liens are apportioned fairly among 0% bidders. App. 18.

But this creates a perverse incentive of its own: Bidders who, in addition to bidding themselves, send agents to bid on their behalf will obtain a disproportionate share of liens. To prevent this kind of manipulation, the county adopted the “Single, Simultaneous Bidder Rule,” which requires each “tax buying entity” to submit bids in its own name and prohibits it from using “apparent agents, employees, or related entities” to submit simultaneous bids for the same parcel.² id., at 67. Upon registering for an auction, each bidder must submit a sworn affidavit affirming that it complies with the Single, Simultaneous Bidder Rule.

Petitioners and respondents are regular participants in Cook County's tax sales. In July 2005, respondents filed a complaint in the United States District Court for the Northern District of Illinois, contending that petitioners had fraudulently obtained a disproportionate share of liens by violating the Single, Simultaneous Bidder Rule at the auctions held from 2002 to 2005. According to respondents, petitioner Sabre Group, LLC, and its principal Barrett Rochman arranged for related firms to bid on Sabre Group's behalf and directed them to file false attestations that they complied...