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SUPREME COURT DOCKET REPORT

Mayer Brown's Supreme Court and Appellate Practice Group distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community. We also email the Docket Report to our subscribed members and if you don't already subscribe to the Docket Report and would like to, please click here.

October Term 2007 - No. 7 - January 8, 2008

The Supreme Court granted certiorari today in two cases of interest to the business community:


Civil RICO--Whether reliance by the plaintiff is a required element of a civil RICO claim. RICO, the Racketeer Influenced and Corrupt Organizations Act, makes it a crime for "any person employed by or associated with any enterprise engaged in *** interstate or foreign commerce, to conduct or participate *** in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. 1962(c). "Racketeering activity" is defined to include any act that would constitute federal mail or wire fraud. Id. 1961(1)(B). Under section 1964(c) of the Act, "[a]ny person injured in his business or property by reason of a violation of section 1962" may bring a civil action under RICO. The Supreme Court granted certiorari in Bridge v. Phoenix Bond & Indemnity Co., No. 07-210, to determine whether reliance is a required element of a RICO claim predicated on mail fraud and, if it is, whether that reliance must be by the plaintiff.

This case will help define the breadth of liability under civil RICO, and thus will have important ramifications for many members of the business community. Plaintiffs hoping to win treble damages routinely allege civil RICO violations based on alleged mail and wire fraud. A holding that a RICO plaintiff must itself rely on the alleged fraudulent behavior will likely decrease the frequency of civil RICO claims.

There is a clear circuit split on the issue of whether a claimant must itself have relied on an alleged misrepresentation to succeed in a civil RICO claim. Indeed, the Supreme Court has twice in the last three years granted certiorari to address this issue--in Anza v. Ideal Steel Supply Corp., No. 04-433, described in the November 28, 2005 Docket Report, and in Bank of China v. NBM LLC, No. 03-1559, described in the June 27, 2005 Docket Report --but for various reasons did not reach the issue in either case.

In this case, the parties are all entities that regularly participate in Cook County, Illinois's tax lien auctions. Petitioners allegedly submitted false information to the County in conjunction with those auctions--material that the respondents never saw. According to the Seventh Circuit, "the direct victim [of a false submission--here, the respondents] may recover through RICO whether or not it is the direct recipient of the false statements." 477 F.3d 928, 932 (7th Cir. 2007) (emphasis in original). By contrast, at least two other circuits have held that plaintiffs must show that they "in fact relied upon [the defendant's] material misrepresentation. Vandenbroeck v. CommonPoint Mortgage Co., 210 F.3d 696, 701 (6th Cir. 2000); see also Sikes v. Teleline, Inc., 281 F.3d 1350, 1360-1361 (11th Cir. 2002).

Amicus briefs in support of petitioners will be due on February 21, 2008; amicus briefs in support of the respondents will be due on March 19, 2008. Any questions about this case should be directed to appellate@mayerbrown.com.

Article III Standing--Assignment of claim for purposes of collection. Article III of the U.S. Constitution requires that all federal lawsuits be initiated by a plaintiff who has "standing" to sue, i.e., a plaintiff who has suffered an actual injury that is traceable to the defendant's conduct and that would be redressed by a favorable decision. In Sprint Communications Co. v. APCC Services, Inc., No. 07-552, the Supreme Court granted certiorari to decide whether this bedrock constitutional requirement is satisfied by a suit brought by a plaintiff who has not itself suffered an actual injury but instead has been assigned a legal claim "for purposes of collection" on behalf of the injured party.

This case raises a significant issue about the extent to which parties can "contract into" Article III standing. If the Supreme Court affirms the D.C. Circuit's ruling that a contract can be sufficient to confer standing, it may signal a willingness to broaden the concept of constitutional injury, allowing those who suffered an actual injury, but may not have the time and resources to bring a claim on their own, to assign their claims to third-parties who are better positioned to litigate. This development would be particularly significant for the business community because, as the petitioners point out, it may allow plaintiffs to successfully pursue cases that are the functional equivalent of class actions, but without the procedures that the class action rules provide for the protection of defendants.

This case involves the compensation that long-distance telephone companies owe to payphone owners for certain calls made by payphone users. By contract, the payphone owners assigned their claims to third-party "aggregators," who are tasked with collecting the compensation and distributing it to the owners. The aggregators are paid a fee for their services, which is based not on what they recover but instead on the number of phone lines that the payphone owner operates. In this case, respondent APCC, the nation's largest aggregator, sued petitioners Sprint and AT&T, alleging that the compensation that those companies were paying was too low under the relevant FCC rules. The suit was brought on behalf of hundreds of payphone owners around the country.

Defendants moved to dismiss for lack of standing. They argued that APCC had no real stake in the outcome of the case because, under the terms of the assignment, any proceeds from a favorable judgment or settlement would simply be returned to the payphone companies. The district court ultimately held that APCC had standing. A divided panel of the D.C. Circuit agreed, with the majority emphasizing that the assignment transferred the "entire interest" of the payphone owners' legal claims. The court of appeals concluded that, as a matter of law, the assignment of a legal right to bring a claim gives the assignee a personal stake in the litigation sufficient to confer standing under Article III. That is the basic question that the Supreme Court has now agreed to review.

Amicus briefs in support of petitioners will be due on February 21, 2008; amicus briefs in support of the respondents will be due on March 19, 2008. Any questions about this case should be directed to appellate@mayerbrown.com.

 


Mayer Brown Supreme Court Docket Reports provide information and comments on legal issues and developments of interest to our clients and friends. They are not a comprehensive treatment of the subject matter covered and are not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed.

 
 
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