Hannosh v. Segal

Decision Date22 May 2014
Docket NumberNo. 1 CA–CV 12–0811.,1 CA–CV 12–0811.
Citation328 P.3d 1049,235 Ariz. 108,687 Ariz. Adv. Rep. 14
PartiesJerry HANNOSH, a married man, Plaintiff/Appellant, v. David P. SEGAL and Jane Doe Segal, his wife; Zalman Segal and Jane Doe segal, his wife; Joseph Segal and Jane Doe Segal, his wife, Defendants/Appellees. Jerry Hannosh, a married man, Plaintiff/Appellee, v. David P. Segal and Jane Doe Segal, his wife; Zalman Segal and Jane Doe Segal, his wife; Joseph Segal and Jane Doe Segal, his wife, Defendants/Appellants.
CourtArizona Court of Appeals

OPINION TEXT STARTS HERE

Jeffrey M. Proper, PLLC, Phoenix By Jeffrey M. Proper, for Plaintiff/Appellant Jerry Hannosh.

David P. Segal, Zalman Segal, Phoenix Joseph Segal, Los Angeles, CA, for Defendants/Appellees.

OPINION

PORTLEY, Judge.

¶ 1 We are asked to decide whether a person gambling on Internet websites can bring a private right of action to recover his losses under the Organized Crime, Fraud and Terrorism Act, Arizona Revised Statutes (“A.R.S.”) section 13–2314.04(A),1 also known as Arizona RICO or Arizona's racketeering statute. Because we agree with the superior court that such a cause of action is unavailable, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 Jerry Hannosh (Hannosh) bet on sporting events on the Internet and ultimately lost approximately $800,000. In an attempt to recover his losses, he filed a lawsuit against David Segal, Zalman Segal, Joseph Segal, and their respective spouses (collectively, the Segals) under Arizona's racketeering statute alleging their gambling websites constituted an enterprise engaged in a pattern of unlawful activity and that they were engaged in civil racketeering. The Segals filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted, arguing that Hannosh had no cognizable injury, could not show proximate cause, and that his allegations inadequately supported liability. The superior court granted the motion and awarded the Segals their attorneys' fees and costs.

¶ 3 The court, however, reconsidered the award of attorneys' fees, and found that it would be unjust under § 13–2314.04(M) to award fees to the Segals. The Segals filed an unsuccessful motion asking the court to reconsider its denial of attorneys' fees. The parties then filed their appeals.

DISCUSSION
Standard of Review

¶ 4 We review de novo a dismissal of a complaint for failure to state a claim upon which relief may be granted. Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7, 284 P.3d 863, 866 (2012). We will affirm if the plaintiff would not be entitled to relief even if all alleged facts could be proven to be true. Jeter v. Mayo Clinic Ariz., 211 Ariz. 386, 391, ¶ 18, 121 P.3d 1256, 1261 (App.2005). We assume the truth of only well-pled facts in the complaint and reasonable inferences from those facts. Cullen v. Auto–Owners Ins. Co., 218 Ariz. 417, 419, ¶ 7, 189 P.3d 344, 346 (2008). We can affirm the trial court's dismissal if correct for any reason. See Dube v. Likins, 216 Ariz. 406, 417 n. 3, ¶ 36, 167 P.3d 93, 104 n. 3 (App.2007).

I. Are Gambling Losses an Injury under Arizona's Racketeering Statute Providing a Private Cause of Action?

¶ 5 Hannosh contends that the superior court incorrectly relied on federal, rather than Arizona, law when it dismissed his complaint. He argues that the money he lost gambling constitutes a cognizable injury that was proximately caused by the Segals' alleged Arizona RICO violations.

¶ 6 Whether gambling losses constitute an injury to a person, property or business under § 13–2314.04(A) is a question of statutory construction subject to de novo review. See State v. Estrada, 201 Ariz. 247, 250, ¶ 15, 34 P.3d 356, 359 (2001). Where the language of a statute is clear, we apply the plain language of the statute. State v. Gallagher, 205 Ariz. 267, 269, ¶ 5, 69 P.3d 38, 40 (App.2003). But where there is ambiguity, we engage in statutory construction to determine the legislature's intent. Id.; see In re Estate of Winn, 214 Ariz. 149, 151, ¶ 8, 150 P.3d 236, 238 (2007) (noting that our primary goal when construing a statute is to effectuate the intent of the legislature). “To ascertain intent, we examine the words of the statutes at issue, ‘the polic[ies] behind the statute[s] and the evil[s] [that they were] designed to remedy.’ In re Estate of Winn, 214 Ariz. at 151, ¶ 8, 150 P.3d at 238 (quoting Calvert v. Farmers Ins. Co. of Ariz., 144 Ariz. 291, 294, 697 P.2d 684, 687 (1985)).

¶ 7 Arizona RICO allows a private cause of action for racketeering. Section 13–2314.04(A) provides that:

A person who sustains reasonably foreseeable injury to his person, business or property by a pattern of racketeering activity, or by a violation of § 13–2312 involving a pattern of racketeering activity, may file an action in superior court for the recovery of up to treble damages and the costs of the suit, including reasonable attorney fees for trial and appellate representation.[ 2]

“Racketeering,” in pertinent part, is defined as any act or preparatory act committed for financial gain, chargeable or indictable under the law where the act occurred and punishable by more than a year's imprisonment. A.R.S. § 13–2301(D)(4)(b). The racketeering provision specifically includes gambling, 3 money laundering, extortionate extensions of credit and participation in a criminal syndicate. A.R.S. §§ 13–2301(D)(4)(b)(vii), (viii), (xiii), (xxvi); –2314.04(T)(3)(b). A “pattern of racketeering activity” means that there must be at least two related and continuous acts of racketeering. A.R.S. § 13–2314.04(T)(3); Lifeflite Med. Air Transp., Inc. v. Native Am. Air Servs., Inc., 198 Ariz. 149, 152, ¶ 12, 7 P.3d 158, 161 (App.2000). A person injured by a § 13–2312 pattern of racketeering violation can also seek relief under § 13–2314(A) from individuals allegedly conducting an illegal enterprise through racketeering. See State ex rel. Corbin v. Pickrell, 136 Ariz. 589, 595, 667 P.2d 1304, 1310 (1983), superseded on other grounds byA.R.S. § 13–2314.04; see also Lifeflite Med. Air Transp., Inc., 198 Ariz. at 152, ¶ 12, 7 P.3d at 161 (recognizing that state statute now requires a pattern of racketeering).

¶ 8 A plaintiff seeking damages or other relief from individuals allegedly engaged in racketeering does not have to allege a special racketeering injury. State ex rel. Corbin, 136 Ariz. at 595, 667 P.2d at 1310. The complaint is sufficient if there is an allegation that the plaintiff has been injured by a violation of § 13–2301(D)(4)(b), the predicate offense, and that the act was done for “financial gain, and ... was chargeable and punishable by imprisonment for more than one year.” Id. And a plaintiff seeking relief for a violation of a § 13–2312 pattern of racketeering “need only allege that he has been injured by the defendant's control or conduct of an enterprise by racketeering.” Id.

¶ 9 Arizona's racketeering statutes do not specifically define an “actionable injury to his person, business or property” to include Internet gambling losses. A.R.S. §§ 13–2314, –2314.04. In creating § 13–2314 in 1978, the Arizona legislature looked to the federal RICO statute, which was intended to combat an increase in organized white-collar crime. Rosier v. First Fin. Capital Corp., 181 Ariz. 218, 220–21, 889 P.2d 11, 13–14 (App.1994) (“Arizona's RICO act is patterned after the federal RICO act.”); State ex rel. Corbin, 136 Ariz. at 596, 667 P.2d at 1311 (noting that the legislature intended Arizona RICO “to be a tool in combating the serious problems of white collar crime”); see Chaset v. Fleer/Skybox Intern., LP, 300 F.3d 1083, 1087 (9th Cir.2002) (Congress enacted RICO ‘to combat organized crime, not to provide a federal cause of action and treble damages' for personal injuries.” (quoting Oscar v. Univ. Students Coop. Ass'n, 965 F.2d 783, 786 (9th Cir.1992)abrogated on different grounds by Diaz v. Gates, 420 F.3d 897, 898–99 (9th Cir.2005))).

¶ 10 We look to federal interpretation for guidance where the federal and state RICO statutes contain similar provisions. Rosier, 181 Ariz. at 221, 889 P.2d at 14; see Lifeflite Med. Air Transp., Inc., 198 Ariz. at 152, ¶ 12, 7 P.3d at 161 (noting that Arizona's racketeering statute was amended in 1993 to be more analogous to federal RICO). Where there are differences, we presume the legislature was deliberate in not following the federal statute. See State v. Ivanhoe, 165 Ariz. 272, 273–74, 798 P.2d 410, 411–12 (App.1990) (finding that Arizona's racketeering act did not include sole proprietorships as enterprises because Arizona chose not to use the word “individual”). For example, a plaintiff alleging a federal RICO violation must demonstrate an injury to one's business or property interest that is cognizable under state law and is a “concrete financial loss.” 18 U.S.C. § 1964(c); Canyon Cnty. v. Syngenta Seeds, Inc., 519 F.3d 969, 975 (9th Cir.2008). Arizona, on the other hand, allows an Arizona RICO claim to be prosecuted if a plaintiff alleges an “injury to his person, business or property.” A.R.S. § 13–2314.04(A) (emphasis added). This distinction does not, however, establish a basis for relief under Arizona law in this case.

¶ 11 Federal courts have also examined RICO to determine what injury is one to business or property. Generally, gambling losses have been held not to constitute property or business harm. See Chaset, 300 F.3d at 1087 (noting that trading card purchasers do not suffer a federal RICO injury when they do not receive a prize card because they paid for and received the chance to obtain the card); Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 188 (3d Cir.2000) (noting that a lost speculative opportunity is not a federal RICO injury); Adell v. Macon Cnty. Greyhound Park, Inc., 785 F.Supp.2d 1226, 1241 (M.D.Ala.2011) (“The injuries of which Plaintiffs complain—illegal gambling losses (unaccompanied by allegations of fraud affecting their losses) and loss of honest...

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