Anza v. Ideal Steel Supply Corp.
Ideal Steel Supply Corp. sued National Steel Supply, a company owned by the Anzas, under the Racketeer Influenced and Corrupt Organizations Act (RICO), claiming that National’s illegal practices had injured Ideal’s business. Since 1998, National had failed to charge sales taxes required by New York State law to customers paying in cash, and it attempted to cover up this practice by mailing fraudulent sales tax reports to the State Department of Taxation and Finance. Ideal alleged that this practice caused it to lose over $5 million in profits. The district court dismissed Ideal’s claim, ruling that it did not sufficiently allege the issue of causation because RICO requires the plaintiff to show that it relied on the defendant’s misrepresentations. Ideal had only alleged that the Department of Taxation and Finance had relied on National’s misrepresentations.
The Second Circuit Court of Appeals reversed, holding that the district court erroneously relied on cases dealing with plaintiffs who were parties to fraudulent transactions. In those cases, the plaintiffs' reliance on the defendants’ misrepresentations acts functions as a causation analysis, but RICO does not require that the defendant's fraudulent communications be directed at a plaintiff. Thus, the Second Circuit concluded that Ideal’s claim sufficiently established that National’s practice caused Ideal’s loss of business.
Question Presented:
Whether a competitor is "injured in his business or property by reason of a violation" of the Racketeer Influenced and Corrupt Organizations Act ("RICO")
where the alleged predicate acts of racketeering activity were mail fraud but the competitor was not the party defrauded and did not rely on the alleged fraudulent behavior.
