Consumer’s suit for RICO fraud and extortion violations may proceed

Consumer’s suit for RICO fraud and extortion violations may proceed

Chen v. Mayflower Transit, Inc., 315 F. Supp. 2d 886 (N.D. III. 2004).

A consumer’s suit against an interstate motor carrier for fraud, extortion, and theft in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1962 et seq., may proceed to trial, a U.S. district court held.

Here, Chen hired a local moving company, which was affiliated with a national company, to move her belongings. She was given a “guaranteed not to exceed” estimate and was orally told the amount would not go above the quoted price. She also received a letter informing her that she could pay by cash or credit card. Chen’s belongings arrived late, and the movers informed her that she could not pay with her credit card because it had not been preapproved. The movers then put her belongings in storage until she could pay an amount that was over twice the amount of the estimate.

Chen sued the national moving company, alleging fraud, extortion, and theft in violation of RICO.

Denying defendant’s motion for summary judgment, the court noted that, in order to have a RICO claim, plaintiff must show the “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Here, defendant does not actually employ movers, create estimates, or move goods. Instead, it enters into agreements with hundreds of local moving companies in exchange for a national billing system and the use of an established, nationally known name.

The court first determined that defendant’s agreements with the other companies created an enterprise separate from that of defendant’s company alone. Further, defendant was able to engage in the alleged racketeering activity by working through the enterprise, which it could not have done alone, the court said. Rejecting defendant’s argument that it only controls its own operations, and the affiliates are the companies that allegedly committed the predicate acts, the court said the evidence demonstrates that defendant developed the policies, handled all customer relations, and controlled the fund distributions.

To prove a pattern of racketeering activity, the court said, plaintiff must show at least two related predicate acts that involve cither a close period of repeated conduct or present a threat of future occurrence. Here, plaintiff has presented evidence of several other consumers over a four-year period who allege similar bait and switch schemes by defendant’s affiliates. Plaintiff has further demonstrated that similar instances are likely to occur in the future because defendant argues the activities are legal and part of its usual business conduct.

Finally, addressing the alleged predicate acts of mail and wire fraud, the court said plaintiff can demonstrate a scheme to defraud and an intent to implement the scheme through mail and wire fraud. A scheme is found when the broken promise is embedded in a larger pattern of enticements that reasonably induces reliance. Such is evident here because the fraudulently low estimates are used to attract customers, providing more money and more affiliates to defendant. The false guarantees in the estimate, coupled with oral assurances that the estimate was firm, amounted to acts of deceit, rather than sloppy business practices, the court held.

Plaintiff’s Counsel

Jose Antonio Isasi II,

Marie Ruth Quinn,

Carey L. Bartell,

Bruce S. Sperling, and

Steven Craig Florsheim, all of Chicago, III.

Copyright Association of Trial Lawyers of America Sep 2004

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