Summary
Depositors in First Maryland Savings and Loan Association appealed the dismissal of civil RICO and related state-law claims against former First Maryland officers and directors, former Maryland Savings-Share Insurance Corporation officials, and affiliated savings and loan institutions. The Fourth Circuit affirmed, holding that the RICO claims against the MSSIC defendants failed for lack of a sufficient causal connection between the alleged racketeering acts and the plaintiffs’ loss of interest, and affirming dismissal of claims against the First Maryland defendants in deference to ongoing state receivership proceedings.
Topics
Practice areas
Questions Presented
- Whether the amended complaint adequately pleaded the causal connection required for a private civil RICO claim against the MSSIC defendants.
- Whether the district court properly dismissed the pendent state-law claims against the MSSIC defendants after dismissing the federal RICO claim.
- Whether Burford abstention was appropriate for the claims against the First Maryland defendants because those claims interfered with Maryland's comprehensive receivership and liquidation scheme.
- Whether state and federal courts have concurrent jurisdiction over private civil RICO claims.
Holdings
- A civil RICO plaintiff must show both injury to business or property and that the injury was proximately caused by the predicate racketeering acts. A bare, attenuated cause-in-fact connection is insufficient.
- The court declined to decide whether the amended complaint adequately alleged a RICO pattern and affirmed on the alternative causation ground.
- Burford abstention was proper because the federal action would interfere with Maryland's comprehensive and centralized statutory scheme for administering and liquidating insolvent savings and loan associations.
- State and federal courts have concurrent jurisdiction over private civil RICO claims.
Key quotations
“These require not only cause-in-fact, but "legal" or "proximate" cause as well, the latter involving a policy rather than a purely factual determination: "whether the conduct has been so significant and important a cause that the defendant should be held responsible."” (¶ 37)
“We therefore hold, with the Ninth Circuit in Lou, that the state and federal courts share concurrent jurisdiction over civil RICO claims.” (¶ 57)
Factual background
The plaintiffs were depositors in First Maryland Savings and Loan Association, a state-chartered thrift formerly insured by the Maryland Savings-Share Insurance Corporation. After rumors of instability at other MSSIC-insured institutions triggered a run on the state's savings and loan industry, Maryland placed First Maryland into conservatorship and later receivership, freezing or terminating the accrual of interest on deposit accounts. The depositors alleged that former First Maryland and MSSIC officials used misleading advertisements and communications to induce deposits and concealed financial problems, causing loss of interest income when First Maryland became insolvent.
Procedural history
The district court dismissed the civil RICO count against the MSSIC defendants under Federal Rule of Civil Procedure 12(b)(6) for failure to allege a legally sufficient pattern of racketeering activity and dismissed the pendent state claims against those defendants under United Mine Workers v. Gibbs. It dismissed the federal and state claims against the First Maryland defendants on abstention grounds in deference to ongoing Maryland receivership proceedings. The Fourth Circuit affirmed, relying on lack of proximate causation as to the MSSIC defendants and Burford abstention as to the First Maryland defendants.