Howell Petroleum Corporation, Plaintiff-appellant, v. Eldridge v. Weaver, et al., Defendants-appellees, 776 F.2d 1302 (5th Cir. 1986)

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U.S. Court of Appeals for the Fifth Circuit - 776 F.2d 1302 (5th Cir. 1986) Nov. 22, 1985. Rehearing Denied Jan. 17, 1986

Bonham, Carrington & Fox, Eugene B. Wilshire, Patrick J. Dyer, Houston, Tex., for plaintiff-appellant.

Schlanger, Cook, Cohn, Mills & Grossberg, C. Henry Kollenberg, H. Miles Cohn, Houston, Tex., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Texas.

Before RUBIN, JOHNSON and JONES, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

After the district court had dismissed this suit based on the Racketeer Influenced and Corrupt Organizations Act (RICO)¹ because the amended complaint made no allegation of injury to plaintiff's business or property resulting from anything other than the alleged predicate acts, the United States Supreme Court decided Sedima,² in which it held:

Section 1964(c) [of RICO] authorizes a private suit by ' [a]ny person injured in his business or property by reason of a violation of Sec. 1962.' Section 1962 in turn makes it unlawful for 'any person'--not just mobsters--to use money derived from a pattern of racketeering activity to invest in an enterprise, to acquire control of an enterprise through a pattern of racketeering activity, or to conduct an enterprise through a pattern of racketeering activity. Secs. 1962(a)-(c). If the defendant engages in a pattern of racketeering activity in a manner forbidden by these provisions, and the racketeering activities injure the plaintiff in his business or property, the plaintiff has a claim under Sec. 1964(c). There is no room in the statutory language for an additional, amorphous "racketeering injury" requirement.

The defendants-appellees contend that dismissal is correct. They argue in addition that the complaint is also deficient because it lacks sufficient particularity.

The Court also held in Sedima:

A violation of Sec. 1962(c), the section on which Sedima relies, requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. The plaintiff must, of course, allege each of these elements to state a claim. Conducting an enterprise that affects interstate commerce is obviously not in itself a violation of Sec. 1962, nor is mere commission of the predicate offenses. In addition, the plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation.

The complaint complies with the statute. The complaint alleges damages resulting from the conduct of an enterprise through a pattern of racketeering activity. The complaint's allegation of injury--loss of funds and injury to property and business resulting from the defendants' fraudulent scheme to misapply funds entrusted to them to maintain their interest in the Enterprise--satisfies the requirement of Sec. 1964(c).

The judgment of dismissal for failure to state a claim is, therefore, REVERSED and the case is REMANDED for further proceedings consistent with Sedima and American National Bank and Trust Company of Chicago v. Haroco, Inc.³

18 U.S.C. § 1961 et seq

S.P.R.L. v. Imrex Co., Inc., --- U.S. ----, 105 S. Ct. 3275, 3285-86, 87 L. Ed. 2d 346 (1985)

--- U.S. ----, 105 S. Ct. 3291, 87 L. Ed. 2d 437 (1985)

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