Sedima, S.P.R.L. v. Imrex Co., Inc., Et Al

473 U.S. 479 (1985)

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Nature of the Case

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Facts

RICO provides a private civil action to recover treble damages for injury 'by reason of a violation of' its substantive provisions. RICO takes aim at 'racketeering activity,' which it defines as any act 'chargeable' under several generically described state criminal laws, any act 'indictable' under numerous specific federal criminal provisions, including mail and wire fraud, and any 'offense' involving bankruptcy or securities fraud or drug-related activities that is 'punishable' under federal law. It outlaws the use of income derived from a 'pattern of racketeering activity' to acquire an interest in or establish an enterprise engaged in or affecting interstate commerce; the acquisition or maintenance of any interest in an enterprise 'through' a pattern of racketeering activity; conducting or participating in the conduct of an enterprise through a pattern of racketeering activity; and conspiring to violate any of these provisions. Congress set out a far-reaching civil enforcement scheme: 'Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.' P, a Belgian corporation, entered into a joint venture with D. The agreement called for the parties to split the net proceeds. D filled about $8 million in orders and P became convinced, that D was presenting inflated bills, and collecting for nonexistent expenses. P sued D for unjust enrichment, conversion, and breach of contract, fiduciary duty, and a constructive trust. P asserted RICO claims against D and two of its officers based on the predicate acts of mail and wire fraud. The District Court held that a complaint must allege a 'RICO-type injury,' which was either some sort of distinct 'racketeering injury,' or a 'competitive injury.' It dismissed the RICO counts. The Court of Appeals affirmed. It held that P's complaint failed to allege an injury 'by reason of a violation of section 1962.' It was Congress' intent to compensate victims for 'certain specific kinds of organized criminality,' and not to provide additional remedies for already compensable injuries. A plaintiff must allege a 'racketeering injury' -- an injury 'different in kind from that occurring as a result of the predicate acts themselves, or not simply caused by the predicate acts, but also caused by an activity which RICO was designed to deter.' The complaint was defective for not alleging that Ds had already been criminally convicted of the predicate acts of mail and wire fraud or a RICO violation. The Supreme Court granted certiorari.