Summary
The Second Circuit affirmed dismissal of D. Lawrence Burdick’s civil RICO complaint against American Express for failure to state a claim. The court held that Burdick lacked standing under 18 U.S.C. § 1964(c) because the alleged predicate acts injured Shearson’s customers, not Burdick, and his discharge and loss of his client base were too remotely related to the alleged fraud.
Topics
Practice areas
Questions Presented
- Whether a civil RICO plaintiff has standing under 18 U.S.C. § 1964(c) without alleging that the predicate acts directly injured the plaintiff's own business or property.
- Whether Burdick's alleged interference with his ability to service customers, earn a living, and retain his client base was sufficiently related to Shearson's alleged mail and securities fraud to constitute an injury by reason of a RICO violation.
- Whether Burdick's discharge after complaining about the alleged fraudulent practices constituted a compensable injury under civil RICO.
Holdings
- A civil RICO plaintiff must allege that injury to the plaintiff's own business or property resulted from the predicate acts constituting the alleged RICO violation; injury suffered by customers or other persons is insufficient.
- Alleged harm consisting of interference with Burdick's ability to service customers, keep them satisfied, and earn a living was too remotely related to the alleged mail and securities fraud to support civil RICO standing.
- An employee's discharge after reporting an employer's alleged illegal scheme does not, without more, constitute injury to business or property by reason of the predicate acts for purposes of civil RICO standing.
Key quotations
“plaintiff only has standing [under Sec. 1964(c) ] if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation.” (Paragraph 9)
“Firing Nodine under these circumstances was wrong, but it did not violate the RICO Act.” (Paragraph 12)
Factual background
Burdick was a former vice president of Shearson Lehman Brothers, a wholly owned subsidiary of American Express. He alleged that Shearson delayed crediting customers' dividend and interest payments while using the funds for its own purposes, and that Shearson's representatives churned customer accounts and charged excessive commissions. Burdick claimed that he complained about those practices, refused to participate, and was fired, allegedly causing him to lose his client base and income.
Procedural history
Burdick sued American Express seeking treble damages under civil RICO, alleging that practices by its subsidiary, Shearson, constituted mail and securities fraud and that he was discharged after complaining about those practices. The district court dismissed the complaint under Rules 12(b)(6) and 9(b), concluding that Burdick was not injured by reason of the alleged predicate acts within the meaning of § 1964(c). The Second Circuit affirmed.