Bank of China v. NMB L.L.C.
The Bank of China sued NBM L.L.C. and other defendants for fraud under the Racketeer Influence and Corrupt Organizations Act (RICO). Bank of China alleged that NBM made false representations to borrow large sums of money and, in some cases, used forged documents. To facilitate this fraud, bribes were paid to Patrick Young, a deputy manager at Bank of China. At trial, the judge instructed the jury that even if Young knew of NBM’s fraudulent actions, the Bank of China could still have been defrauded. The judge reasoned that the Bank is an entity separate from its individual managers, therefore the knowledge of its managers is not automatically imputed to the bank.
NBM argued that these instructions relieved Bank of China from its responsibility under RICO of showing that it reasonably relied on NBM’s false representations. NBM reasoned that, since Young knew about its false representations, Bank of China could not have detrimentally relied on those falsities. On appeal, the Second Circuit found that any civil suit for fraud brought under RICO requires the plaintiffs to show reasonable reliance on the false representations. Furthermore, the court decided that for a bank to rely on a misrepresentation, the bank’s officers must inevitably do so. Therefore it was erroneous for the district court judge to instruct the jury that knowledge held by a senior manager cannot be imputed to the Bank. The Second Circuit recognized that while there is still a doctrine (the “adverse interest exception” doctrine) that could bar the imputation of knowledge between Young and Bank of China, since the original instructions were incorrect, the jury should be allowed to consider this doctrine only after hearing the correct instructions.
Questions Presented:
1. Are civil RICO plaintiffs who allege mail or wire fraud as predicate acts required to establish “reasonable reliance” under 18 U.S.C.
1964(c)?
2. Are civil RICO plaintiffs who allege bank fraud as predicate acts required to establish “reasonable reliance” under 18 U.S.C. 1964(c).
Supreme Court Opinion
