Summary
The Eighth Circuit affirmed dismissal of a trustee’s civil RICO claims against trust beneficiaries, holding that instructing an attorney to gather trust records and pre-litigation attorney-client communications are not predicate acts of mail or wire fraud, and that, absent corruption, litigation activities cannot serve as RICO predicates. The court also held that three media statements made over a few days did not establish a pattern of racketeering activity because they lacked closed- or open-ended continuity, and it upheld the denial of post-judgment leave to amend as futile and prejudicial.
Topics
Practice areas
Questions Presented
- Whether the district court properly dismissed the civil RICO claims for failure to state a claim.
- Whether the alleged predicate acts (media statements and litigation activities) constitute racketeering activity and establish a pattern of racketeering activity.
- Whether the district court abused its discretion in denying UMB's post-judgment motion for leave to file a Second Amended Complaint.
Holdings
- An instruction to an attorney to collect trust records is not a representation and cannot constitute mail or wire fraud; it is not a predicate act under RICO.
- Pre-litigation communications between defendants and their attorney about whether to pressure a trustee, even if ending in a groundless suit, do not constitute predicate acts of fraud under RICO absent criminal activity tainting those communications; ordinary civil dispute remedies suffice.
- In the absence of corruption, allegations of frivolous, fraudulent, or baseless litigation activities—without more—cannot constitute a RICO predicate act.
- Three predicate acts of media communications spanning a few days and targeting a single victim are insufficient to show closed-end continuity; there is no threat of open-ended continuity where the predicate acts pertained to a single, non-replicable event and the plaintiff resigned as trustee.
- Post-judgment motions for leave to amend are disfavored and subject to stringent standards; denial was not an abuse of discretion because the proposed amendment was futile and would unduly prejudice defendants.
Key quotations
“We have . . . rejected attempts to convert ordinary civil disputes into RICO cases.”
“If a suit is groundless or filed in bad faith, the law of torts may provide a remedy. Resort to a federal criminal statute is unnecessary.”
“In the absence of corruption . . . allegations of frivolous, fraudulent, or baseless litigation activities -- without more -- cannot constitute a RICO predicate act.”
“To establish a RICO pattern it must also be shown that the predicates themselves amount to, or that they otherwise constitute a threat of, continuing racketeering activity.”
Factual background
Thomas Hart Benton and his wife left a family trust including hundreds of artworks, real estate, and personal effects, administered by UMB Bank as sole trustee. The primary beneficiary is their daughter Jessie Benton; her children are discretionary beneficiaries. The beneficiaries, facing financial pressures including support of a communal family, requested increased distributions. After UMB refused and the beneficiaries' attorney gathered trust records, the beneficiaries sued UMB in state probate court for mismanagement and made allegedly false statements to media outlets, leading UMB to resign as trustee and file this federal RICO suit.
Procedural history
UMB Bank, as trustee, filed this federal action alleging that trust beneficiaries violated RICO through predicate acts of mail, wire, and bank fraud. The district court dismissed the First Amended Complaint for failure to state a claim. UMB moved post-judgment for leave to file a Second Amended Complaint, which the district court denied. UMB appealed both orders.