Hemi Group, LLC v. City of New York , 130 S. Ct. 983 ( 2010 )

(Slip Opinion) OCTOBER TERM, 2009 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
HEMI GROUP, LLC, ET AL. v. CITY OF NEW YORK,
NEW YORK
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE SECOND CIRCUIT
No. 08–969. Argued November 3, 2009—Decided January 25, 2010
Respondent New York City taxes the possession of cigarettes. Peti
tioner Hemi Group, based in New Mexico, sells cigarettes online to
residents of the City. Neither state nor city law requires out-of-state
sellers such as Hemi to charge, collect, or remit the City’s tax; in
stead, the City must recover its tax on out-of-state sales directly from
the purchasers. But the Jenkins Act, 15 U. S. C. §§375–378, requires
out-of-state sellers to submit customer information to the States into
which they ship cigarettes, and New York State has agreed to for
ward that information to the City. That information helps the City
track down cigarette purchasers who do not pay their taxes. Against
that backdrop, the City filed this lawsuit under the Racketeer Influ
enced and Corrupt Organizations Act (RICO), alleging that Hemi’s
failure to file the Jenkins Act reports with the State constituted mail
and wire fraud, which are defined as “racketeering activit[ies],” 18
U. S. C. §1961(1), subject to enforcement under civil RICO, §1964(c).
The District Court dismissed the claims, but the Second Circuit va
cated the judgment and remanded. Among other things, the Court of
Appeals held that the City’s asserted injury—lost tax revenue—came
about “by reason of” the predicate mail and wire frauds. It accord
ingly determined that the City had stated a valid RICO claim.
Held: The judgment is reversed, and the case is remanded.
541 F. 3d 425, reversed and remanded.
CHIEF JUSTICE ROBERTS delivered the opinion of the Court in part,
concluding that because the City cannot show that it lost tax revenue
“by reason of” the alleged RICO violation, it cannot state a RICO
claim. Pp. 5–15.
2 HEMI GROUP, LLC v. CITY OF NEW YORK
Syllabus
(a) To establish that an injury came about “by reason of” a RICO
violation, a plaintiff must show that a predicate offense “not only was
a ‘but for’ cause of his injury, but was the proximate cause as well.”
Holmes v. Securities Investor Protection Corporation, 503 U. S. 258,
268. Proximate cause for RICO purposes should be evaluated in light
of its common-law foundations; it thus requires “some direct relation
between the injury asserted and the injurious conduct alleged.” Ibid.A link that is “too remote,” “purely contingent,” or “indirec[t]” is in
sufficient. Id., at 271, 274.
The City’s causal theory cannot satisfy RICO’s direct relationship
requirement. Indeed, the causal link here is far more attenuated
than the one the Court rejected as “purely contingent” and “too re
mote” in Holmes. Id., at 271. According to the City, Hemi committed
fraud by selling cigarettes to city residents and failing to submit the
required customer information to the State. Without the reports
from Hemi, the State could not pass on the information to the City,
even if it had been so inclined. Some of the customers legally obli
gated to pay the cigarette tax to the City failed to do so. Because the
City did not receive the customer information, it could not determine
which customers had failed to pay the tax. The City thus could not
pursue those customers for payment. The City thereby was injured
in the amount of the portion of back taxes that were never collected.
As the Court reiterated in Holmes, “[t]he general tendency of the law,
in regard to damages at least, is not to go beyond the first step,” id.,at 271–272, and that “general tendency” applies with full force to
proximate cause inquiries under RICO, e.g., ibid. Because the City’s
causation theory requires the Court to move well beyond the first
step, that theory cannot satisfy RICO’s direct relationship require
ment.
The City’s claim suffers from the same defect as the RICO claim re
jected in Anza v. Ideal Steel Supply Corp., 547 U. S. 451, 458–461,
where the conduct directly causing the harm was distinct from the
conduct giving rise to the fraud, see id., at 458. Indeed, the discon
nect between the asserted injury and the alleged fraud in this case is
even sharper. In Anza, the same party had both engaged in the
harmful conduct and committed the fraudulent act. Here, the City’s
theory of liability rests not just on separate actions, but separate ac
tions carried out by separate parties. The City’s theory thus requires
that the Court extend RICO liability to situations where the defen
dant’s fraud on the third party (the State) has made it easier for a
fourth party (the taxpayer) to cause harm to the plaintiff (the City).
Indeed, the fourth-party taxpayers here only caused harm to the City
in the first place if they decided not to pay taxes they were legally ob
ligated to pay. Put simply, Hemi’s obligation was to file Jenkins Act
Cite as: 559 U. S. ____ (2010) 3
Syllabus
reports with the State, not the City, and the City’s harm was directly
caused by the customers, not Hemi. The Court has never before
stretched the causal chain of a RICO violation so far, and declines to
do so today. See, e.g., id., at 460–461. Pp. 5–9.
(b) The City attempts to avoid this conclusion by characterizing the
violation not merely as Hemi’s failure to file Jenkins Act reports with
the State, but as a more general systematic scheme to defraud the
City of tax revenue. But if the City could escape the proximate-cause
requirement merely by alleging that the fraudulent scheme embraced
all those indirectly harmed by the alleged conduct, the Court’s RICO
proximate cause precedent would become a mere pleading rule. That
precedent makes clear that “the compensable injury flowing from a
[RICO] violation . . . ‘necessarily is the harm caused by [the] predi
cate acts.’ ” Anza, supra, at 457. Because the only fraudulent con
duct alleged here is a violation of the Jenkins Act, the City must, but
cannot, show that Hemi’s failure to file the Jenkins Act reports led
directly to its injuries.
The City also errs in relying on Bridge v. Phoenix Bond & Indem
nity Co., 553 U. S. ___. There, the plaintiffs’ causation theory was
“straightforward”: The causal link in Bridge involved a direct and
easily identifiable connection between the fraud at issue and the
plaintiffs’ injury, id., at ___; the plaintiffs there “were the only parties
injured by petitioners’ misrepresentations,” id., at ___; and there
were “no independent factors that account[ed] for [the] injury,” id., at
___. The City’s theory in this case is anything but straightfor
ward: Multiple steps separate the alleged fraud from the asserted in
jury. And in contrast to Bridge, where there were “no independent
factors that account[ed] for [the plaintiffs’] injury,” id., at ___, here
there certainly were: The City’s theory of liability rests on the inde
pendent actions of third and even fourth parties. Pp. 10–14.
ROBERTS, C. J., delivered the opinion of the Court in part, in which
SCALIA, THOMAS, and ALITO, JJ., joined, and in which GINSBURG, J.,
joined in part. GINSBURG, J., filed an opinion concurring in part and
concurring in the judgment. BREYER, J., filed a dissenting opinion, in
which STEVENS and KENNEDY, JJ., joined. SOTOMAYOR, J., took no part
in the consideration or decision of the case.
Cite as: 559 U. S. ____ (2010) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash­
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 08–969
_________________
HEMI GROUP, LLC AND KAI GACHUPIN,
PETITIONERS v. CITY OF NEW YORK,
NEW YORK
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SECOND CIRCUIT
[January 25, 2010]
CHIEF JUSTICE ROBERTS delivered the opinion of the
Court in part.
The City of New York taxes the possession of cigarettes.
Hemi Group, based in New Mexico, sells cigarettes online
to residents of the City. Neither state nor city law re­
quires Hemi to charge, collect, or remit the tax, and the
purchasers seldom pay it on their own. Federal law,
however, requires out-of-state vendors such as Hemi to
submit customer information to the States into which they
ship the cigarettes.
Against that backdrop, the City filed this lawsuit under
the Racketeer Influenced and Corrupt Organizations Act
(RICO), alleging that Hemi failed to file the required
customer information with the State. That failure, the
City argues, constitutes mail and wire fraud, which caused
it to lose tens of millions of dollars in unrecovered ciga­
rette taxes. Because the City cannot show that it lost the
tax revenue “by reason of” the alleged RICO violation, 18
U. S. C. §1964(c), we hold that the City cannot state a
claim under RICO. We therefore reverse the Court of
2 HEMI GROUP, LLC v. CITY OF NEW YORK
Opinion of the Court
Appeals’ decision to the contrary.
I
A
This case arises from a motion to dismiss, and so we
accept as true the factual allegations in the City’s second
amended complaint. See Leatherman v. Tarrant County
Narcotics Intelligence and Coordination Unit, 507 U. S.
163, 164 (1993).
New York State authorizes the City of New York to
impose its own taxes on cigarettes. N. Y. Unconsol. Law
Ann. §9436(1) (West Supp. 2009). Under that authority,
the City has levied a $1.50 per pack tax on each standard
pack of cigarettes possessed within the City for sale or use.
N. Y. C. Admin. Code §11–1302(a) (2008); see also Record
A1016. When purchasers buy cigarettes from in-state
vendors, the seller is responsible for charging, collecting,
and remitting the tax. N. Y. Tax Law Ann. §471(2) (West
Supp. 2009). Out-of-state vendors, however, are not.
Ibid.; see City of New York v. Smokes-Spirits.com, Inc.,
541 F. 3d 425, 432–433 (CA2 2008). Instead, the City is
responsible for recovering, directly from the customers,
use taxes on cigarettes sold outside New York. That can
be difficult, as those customers are often reluctant to pay
and tough to track down. One way the City can gather
information that would assist it in collecting the back
taxes is through the Jenkins Act, 63 Stat. 884, as amended
by 69 Stat. 627. That Act requires out-of-state cigarette
sellers to register and to file a report with state tobacco
tax administrators listing the name, address, and quantity
of cigarettes purchased by state residents. 15 U. S. C.
§§375–378.
New York State and the City have executed an agree­
ment under which both parties undertake to “cooperate
fully with each other and keep each other fully and
promptly informed with reference to any person or trans­
Cite as: 559 U. S. ____ (2010) 3
Opinion of the Court
action subject to both State and City cigarette taxes in­
cluding [i]nformation obtained which may result in addi­
tional cigarette tax revenue to the State or City provided
that the disclosure of that information is permissible
under existing laws and agreements.” Record A1003. The
City asserts that under that agreement, the State for­
wards Jenkins Act information to the City. Id., at A998;
Second Amended Compl. ¶54. That information helps the
City track down purchasers who do not pay their taxes.
Id., ¶¶58–59.
Hemi Group is a New Mexico company that sells ciga­
rettes online. Hemi, however, does not file Jenkins Act
information with the State. The City alleges that this
failure has cost it “tens if not hundreds of millions of
dollars a year in cigarette excise tax revenue.” Record
A996. Based on Hemi’s failure to file the information with
the State, the City filed this federal RICO claim.
B
RICO provides a private cause of action for “[a]ny per­
son injured in his business or property by reason of a
violation of section 1962 of this chapter.” 18 U. S. C.
§1964(c). Section 1962, in turn, contains RICO’s criminal
provisions. Specifically, §1962(c), which the City invokes
here, makes it “unlawful for any person employed by or
associated with any enterprise engaged in, or the activities
of which affect, interstate . . . commerce, to conduct or
participate, directly or indirectly, in the conduct of such
enterprise’s affairs through a pattern of racketeering
activity.” “[R]acketeering activity” is defined to include a
number of so-called predicate acts, including the two at
issue in this case—mail and wire fraud. See §1961(1).
The City alleges that Hemi’s “interstate sale of ciga­
rettes and the failure to file Jenkins Act reports identify­
ing those sales” constitute the RICO predicate offenses of
mail and wire fraud in violation of §1962(c), for which
4 HEMI GROUP, LLC v. CITY OF NEW YORK
Opinion of the Court
§1964(c) provides a private cause of action. Record A980.
Invoking that private cause of action, the City asserts that
it has suffered injury in the form of lost tax revenue—its
“business or property” in RICO terms—“by reason of”
Hemi’s fraud.
Hemi does not contest the City’s characterization of the
Jenkins Act violations as predicate offenses actionable
under §1964(c). (We therefore assume, without deciding,
that failure to file Jenkins Act material can serve as a
RICO predicate offense.) Instead, Hemi argues that the
City’s asserted injury—lost tax revenue—is not “business
or property” under RICO, and that the City cannot show
that it suffered any injury “by reason of” the failure to file
Jenkins Act reports.
The District Court dismissed the City’s RICO claims,
determining that Hemi owner and officer Kai Gachupin
did not have an individual duty to file Jenkins Act reports,
and thus could not have committed the alleged predicate
acts. City of New York v. Nexicon, Inc., No. 03 CV 383
(DAB), 2006 WL 647716, *7–*8 (SDNY, Mar. 15, 2006).
The District Court therefore held that the City could not
establish that Hemi and Gachupin formed an “enterprise”
as required to establish RICO liability. Id., at *7–*10.
Because it dismissed on that ground, the District Court
did not address whether the City’s loss of tax revenue
constitutes an injury to its “business or property” under
§1964, or whether that injury was caused “by reason of”
Hemi’s failure to file the Jenkins Act reports.
The Second Circuit vacated the District Court’s judg­
ment and remanded for further proceedings. The Court of
Appeals held that the City had established that Gachupin
and Hemi operated as an “enterprise” and that the enter­
prise committed the predicate RICO acts of mail and wire
fraud, based on the failure to file the Jenkins Act material
with the State. 541 F. 3d, at 447–448. The court also
determined that the City’s asserted injury, lost tax reve­
Cite as: 559 U. S. ____ (2010) 5
Opinion of the Court
nue, was “business or property” under RICO. Id., at 444–
445. And that injury, the court concluded, came about “by
reason of” the predicate mail and wire frauds. Id., at 440–
444. The City thus had stated a viable RICO claim.
Judge Winter dissented on the ground that the alleged
RICO violation was not the proximate cause of the City’s
injury. Id., at 458–461.
Hemi filed a petition for certiorari, asking this Court to
determine whether the City had been “directly injured in
its ‘business or property’ ” by reason of the alleged mail
and wire frauds. Pet. for Cert. i. We granted that peti­
tion. 556 U. S. __ (2009).
II
Though framed as a single question, Hemi’s petition for
certiorari raises two distinct issues: First, whether a loss
in tax revenue is “business or property” under 18 U. S. C.
§1964(c); and second, whether the City’s asserted injury
came about “by reason of” the allegedly fraudulent con­
duct, as required by §1964(c). We determine that the City
cannot satisfy the causation requirement—that any injury
the City suffered must be “by reason of” the alleged
frauds—and therefore do not decide whether the City’s
allegations of lost tax revenue constitute an injury to its
“business or property.”
A
In Holmes v. Securities Investor Protection Corporation,
503 U. S. 258 (1992), we set forth the standard of causa­
tion that applies to civil RICO claims. In that case, we
addressed a RICO claim brought by Securities Investor
Protection Corporation (SIPC) against defendants whom
SIPC alleged had manipulated stock prices. Id., at 262–
263. SIPC had a duty to reimburse customers of certain
registered broker-dealers in the event the broker-dealers
were unable to meet their financial obligations. Id., at
6 HEMI GROUP, LLC v. CITY OF NEW YORK
Opinion of the Court
261. When the conspiracy by the stock manipulators was
detected, stock prices collapsed, and two broker-dealers
were unable to meet their obligations to their customers.
SIPC, as insurer against that loss, ultimately was on the
hook for nearly $13 million to cover the customers’ claims.
The Court held that SIPC could not recover against the
conspirators because it could not establish that it was
injured “by reason of” the alleged fraud, as that phrase is
used in RICO.
We explained that, to state a claim under civil RICO,
the plaintiff is required to show that a RICO predicate
offense “not only was a ‘but for’ cause of his injury, but
was the proximate cause as well.” Id., at 268. Proximate
cause for RICO purposes, we made clear, should be evalu­
ated in light of its common-law foundations; proximate
cause thus requires “some direct relation between the
injury asserted and the injurious conduct alleged.” Ibid.A link that is “too remote,” “purely contingent,” or “indi­
rec[t]” is insufficient. Id., at 271, 274.
Applying that standard, we rejected SIPC’s RICO claim.
The alleged conspiracy, we held, directly harmed only the
broker-dealers; SIPC’s injury, on the other hand, was
“purely contingent” on that harm. Id., at 271. The con­
nection between the alleged conspiracy and SIPC’s injury
was therefore “too remote” to satisfy RICO’s direct rela­
tionship requirement. Ibid.The City’s causal theory is far more attenuated than the
one we rejected in Holmes. According to the City, Hemi
committed fraud by selling cigarettes to city residents and
failing to submit the required customer information to the
State. Without the reports from Hemi, the State could not
pass on the information to the City, even if it had been so
inclined. Some of the customers legally obligated to pay
the cigarette tax to the City failed to do so. Because the
City did not receive the customer information, the City
could not determine which customers had failed to pay the
Cite as: 559 U. S. ____ (2010) 7
Opinion of the Court
tax. The City thus could not pursue those customers for
payment. The City thereby was injured in the amount of
the portion of back taxes that were never collected. See
Record A996.
But as we reiterated in Holmes, “[t]he general tendency
of the law, in regard to damages at least, is not to go be­
yond the first step.” 503 U. S., at 271–272 (quoting Asso
ciated Gen. Contractors of Cal., Inc. v. Carpenters, 459
U. S. 519, 534 (1983), in turn quoting Southern Pacific Co.
v. Darnell-Taenzer Lumber Co., 245 U. S. 531, 533 (1918),
internal quotation marks omitted). Our cases confirm
that the “general tendency” applies with full force to
proximate cause inquiries under RICO. Holmes, supra, at
271–272; see also Bridge v. Phoenix Bond & Indemnity
Co., 553 U. S. __, __ (2008) (slip op., at 18–19); Anza v.
Ideal Steel Supply Corp., 547 U. S. 451, 460–461 (2006).
Because the City’s theory of causation requires us to move
well beyond the first step, that theory cannot meet RICO’s
direct relationship requirement.
Our decision in Anza, supra, confirms that the City’s
theory of causation is far too indirect. There we consid­
ered a RICO claim brought by Ideal Steel Supply against
its competitor, National Steel Supply. Ideal alleged that
National had defrauded New York State by failing to
charge and remit sales taxes, and that National was thus
able to undercut Ideal’s prices. The lower prices offered by
National, Ideal contended, allowed National to attract
customers at Ideal’s expense. Id., at 458.
Finding the link between the fraud alleged and injury
suffered to be “attenuated,” we rejected Ideal’s claim. Id.,
at 459. “The direct victim of this conduct,” we held, was
“the State of New York, not Ideal.” Id., at 458. “It was the
State that was being defrauded and the State that lost tax
revenue as a result.” Ibid. We recognized that Ideal had
asserted “its own harms when [National] failed to charge
customers for the applicable sales tax.” Ibid. But the
8 HEMI GROUP, LLC v. CITY OF NEW YORK
Opinion of the Court
cause of Ideal’s harm was “a set of actions (offering lower
prices) entirely distinct from the alleged RICO violation
(defrauding the State).” Ibid. The alleged violation there­
fore had not “led directly to the plaintiff’s injuries,” and
Ideal accordingly had failed to meet RICO’s “requirement
of a direct causal connection” between the predicate of­
fense and the alleged harm. Id., at 460–461.
The City’s claim suffers from the same defect as the
claim in Anza. Here, the conduct directly responsible for
the City’s harm was the customers’ failure to pay their
taxes. And the conduct constituting the alleged fraud was
Hemi’s failure to file Jenkins Act reports. Thus, as in
Anza, the conduct directly causing the harm was distinct
from the conduct giving rise to the fraud. See id., at 458.
Indeed, the disconnect between the asserted injury and
the alleged fraud in this case is even sharper than in
Anza. There, we viewed the point as important because
the same party—National Steel—had both engaged in the
harmful conduct and committed the fraudulent act. We
nevertheless found the distinction between the relevant
acts sufficient to defeat Ideal’s RICO claim. Here, the
City’s theory of liability rests not just on separate actions,
but separate actions carried out by separate parties.
The City’s theory thus requires that we extend RICO
liability to situations where the defendant’s fraud on the
third party (the State) has made it easier for a fourth
party (the taxpayer) to cause harm to the plaintiff (the
City). Indeed, the fourth-party taxpayers here only caused
harm to the City in the first place if they decided not to
pay taxes they were legally obligated to pay. Put simply,
Hemi’s obligation was to file the Jenkins Act reports with
the State, not the City, and the City’s harm was directly
caused by the customers, not Hemi. We have never before
stretched the causal chain of a RICO violation so far, and
we decline to do so today. See id., at 460–461; cf. Associ
ated Gen. Contractors, supra, at 541, n. 46 (finding no
Cite as: 559 U. S. ____ (2010) 9
Opinion of the Court
proximate cause in the antitrust context where the plain­
tiff’s “harm stems most directly from the conduct of per­
sons who are not victims of the conspiracy”).
One consideration we have highlighted as relevant to
the RICO “direct relationship” requirement is whether
better situated plaintiffs would have an incentive to sue.
See Holmes, supra, at 269–270. The State certainly is
better situated than the City to seek recovery from Hemi.
And the State has an incentive to sue—the State imposes
its own $2.75 per pack tax on cigarettes possessed within
the State, nearly double what the City charges. N. Y. Tax
Law Ann. §471(1) (West Supp. 2009). We do not opine on
whether the State could bring a RICO action for any lost
tax revenue. Suffice it to say that the State would have
concrete incentives to try. See Anza, supra, at 460 (“Ideal
accuses the Anzas of defrauding the State of New York out
of a substantial amount of money. If the allegations are
true, the State can be expected to pursue appropriate
remedies”).
The dissent would have RICO’s proximate cause re­
quirement turn on foreseeability, rather than on the exis­
tence of a sufficiently “direct relationship” between the
fraud and the harm. It would find that the City has satis­
fied that requirement because “the harm is foreseeable; it
is a consequence that Hemi intended, indeed desired; and
it falls well within the set of risks that Congress sought to
prevent.” Post, at 6 (opinion of BREYER, J.). If this line of
reasoning sounds familiar, it should. It is precisely the
argument lodged against the majority opinion in Anza.
There, the dissent criticized the majority’s view for “per­
mit[ting] a defendant to evade liability for harms that are
not only foreseeable, but the intended consequences of
the defendant’s unlawful behavior.” 547 U. S., at 470(THOMAS, J., concurring in part and dissenting in part).
But the dissent there did not carry the day, and no one
has asked us to revisit Anza.
10 HEMI GROUP, LLC v. CITY OF NEW YORK
Opinion of the Court
The concepts of direct relationship and foreseeability are
of course two of the “many shapes [proximate cause] took
at common law,” Holmes, supra, at 268. Our precedents
make clear that in the RICO context, the focus is on the
directness of the relationship between the conduct and the
harm. Indeed, Anza and Holmes never even mention the
concept of foreseeability.
B
The City offers a number of responses. It first chal­
lenges our characterization of the violation at issue. In
the City’s view, the violation is not merely Hemi’s failure
to file Jenkins Act information with the State, but a more
general “systematic scheme to defraud the City of tax
revenue.” Brief for Respondent 42. Having broadly de­
fined the violation, the City contends that it has been
directly harmed by reason of that systematic scheme.
Ibid.But the City cannot escape the proximate cause re­
quirement merely by alleging that the fraudulent scheme
embraced all those indirectly harmed by the alleged con­
duct. Otherwise our RICO proximate cause precedent
would become a mere pleading rule. In Anza, for example,
Ideal alleged that National’s scheme “was to give National
a competitive advantage over Ideal.” 547 U. S., at 454–
455. But that allegation did not prevent the Court from
concluding that National’s fraud directly harmed only the
State, not Ideal. As the Court explained, Ideal could not
“circumvent the proximate-cause requirement simply by
claiming that the defendant’s aim was to increase market
share at a competitor’s expense.” Id., at 460.1
——————
1 Even if we were willing to look to Hemi’s intent, as the dissent sug­
gests we should, the City would fare no better. Hemi’s aim was not to
defraud the City (or the State, for that matter) of tax revenue, but to
sell more cigarettes. Hemi itself neither owed taxes nor was obliged to
collect and remit them. This all suggests that Hemi’s alleged fraud was
Cite as: 559 U. S. ____ (2010) 11
Opinion of the Court
Our precedent makes clear, moreover, that “the com­
pensable injury flowing from a [RICO] violation . . . ‘neces­
sarily is the harm caused by [the] predicate acts.’ ” Id., at
457 (quoting Sedima, S. P. R. L. v. Imrex Co., 473 U. S.
479, 497 (1985)). In its RICO statement, the City alleged
that Hemi’s failure to file Jenkins Act reports constituted
the predicate act of mail and wire fraud. Record A980.
The City went on to allege that this predicate act “directly
caused” its harm, id., at A996, but that assertion is a legal
conclusion about proximate cause—indeed, the very legal
conclusion before us. The only fraudulent conduct alleged
here is a violation of the Jenkins Act. See 541 F. 3d, at
459 (Winter, J., dissenting). Thus, the City must show
that Hemi’s failure to file the Jenkins Act reports with the
State led directly to its injuries. This it cannot do.
The City also relies on Bridge, 553 U. S. ___. Bridge
reaffirmed the requirement that there must be “a suffi­
ciently direct relationship between the defendant’s wrong­
ful conduct and the plaintiff’s injury.” Id., at ___ (slip op.,
at 18). The case involved competing bidders at a county
tax-lien auction. Because the liens were profitable even at
the lowest possible bid, multiple bidders offered that low
bid. (The bidding took the form of the percentage tax
penalty the bidder would require the property owner to
pay, so the lowest possible bid was 0%.) To decide which
bidder would be awarded the lien, the county devised a
plan to allocate the liens “on a rotational basis.” Id., at
___ (slip op., at 3) (internal quotation marks omitted). But
as we noted in that case, this created a “perverse incen­
tive”: “Bidders who, in addition to bidding themselves,
sen[t] agents to bid on their behalf [would] obtain a dis­
proportionate share of liens.” Ibid. The county therefore
——————
aimed at Hemi’s competitors, not the City. But Anza teaches that the
competitors’ injuries in such a case are too attenuated to state a RICO
claim.
12 HEMI GROUP, LLC v. CITY OF NEW YORK
Opinion of the Court
prohibited bidders from using such agents. Ibid.A losing bidder alleged that a competitor had defrauded
the county by employing shadow bidders to secure a
greater proportion of liens than it was due. We held that
the bidder-plaintiff had met RICO’s causation require­
ment. Distinguishing that claim from the one at issue in
Anza, we noted that the plaintiff’s theory of causation in
Bridge was “straightforward”: Because of the zero-sum
nature of the auction, and because the county awarded
bids on a rotational basis, each time a fraud-induced bid
was awarded, a particular legitimate bidder was necessar­
ily passed over. 553 U. S., at ___ (slip op., at 18). The
losing bidders, moreover, “were the only parties injured by
petitioners’ misrepresentations.” Ibid. The county was
not; it received the same revenue regardless of which
bidder prevailed.
The City’s theory in this case is anything but straight­
forward: Multiple steps, as we have detailed, separate the
alleged fraud from the asserted injury. And in contrast to
Bridge, where there were “no independent factors that
account[ed] for [the plaintiff’s] injury,” ibid., here there
certainly were: The City’s theory of liability rests on the
independent actions of third and even fourth parties.
The City at various points during the proceedings below
described its injury as the lost “opportunity to tax” rather
than “lost tax revenue.” It is not clear that there is a
substantive distinction between the two descriptions. In
any event, before this Court, the City’s argument turned
on lost revenue, not a lost opportunity to collect it. See,
e.g., Brief for Respondent i (“Counter-Question Pre­
sented[:] Does the City of New York have standing under
RICO because lost tax revenue constitutes a direct injury
to the City’s ‘business or property’ in accord with the
statute, 18 U. S. C. §1964(c), and this Court’s authority?”);
id., at 40 (“[T]he City alleges that it has been injured (the
loss of tax revenues) by defendants’ RICO violations”).
Cite as: 559 U. S. ____ (2010) 13
Opinion of the Court
Indeed, in its entire brief on the merits, the City never
uses the word “opportunity” (or anything similar) to de­
scribe its injury.
Perhaps the City articulated its argument in terms of
the lost revenue itself to meet Hemi’s contention that an
injury to the mere “opportunity to collect” taxes fell short
of RICO’s injury to “property” requirement. Brief for
Petitioners 25 (“The opportunity to collect taxes from
those who did owe them . . . falls within a class of expecta­
tion interests that do not qualify as injury to business or
property and therefore do not confer civil RICO standing”
(internal quotation marks omitted)); see Cleveland v.
United States, 531 U. S. 12, 15 (2000) (“It does not suffice
. . . that the object of the fraud may become property in the
recipient’s hands; for purposes of the mail fraud statute,
the thing obtained must be property in the hands of the
victim”).
That is not to say, however, that the City would fare any
better on the causation question had it framed its argu­
ment in terms of a lost opportunity. Hemi’s filing obliga­
tion would still be to the State, and any harm to the City
would still be caused directly by the customers’ failure to
pay their taxes. See 541 F. 3d, at 461 (Winter, J., dissent­
ing). Whatever the City’s reasons for framing its merits
arguments as it has, we will not reformulate them for it
now.2
——————
2 The dissent recognizes that its position poses the troubling specter
of turning RICO into a tax collection statute. Post, at 11–12 (opinion of
BREYER, J.). The dissent’s answer looks largely to prosecution policy set
forth in the Federal Department of Justice Guidelines, which are, of
course, not only changeable, but have no applicability whatever to state
or local governments. Under the decision below and the dissent’s
position, RICO could be used as a tax collection device based solely on
the failure to file reports under the Jenkins Act, which itself provides
quite limited remedies. See 15 U. S. C. §377 (providing that a violation
of the Jenkins Act may be punished as a misdemeanor with a fine up to
$1,000 and imprisonment for no more than six months). And that
14 HEMI GROUP, LLC v. CITY OF NEW YORK
Opinion of the Court
In a final effort to save its claim, the City has shifted
course before this Court. In its second amended complaint
and RICO statement, the City relied solely on Hemi’s
failure to file Jenkins Act reports with the State to form
the basis of the predicate act mail and wire frauds. See
Second Amended Compl. ¶¶99, 101, 118, 125; Record
A980–A982. Before this Court, however, the City con­
tends that Hemi made affirmative misrepresentations to
City residents, which, the City now argues, comprise part
of the RICO predicate mail and wire frauds. See Brief for
Respondent 42–43. The City’s counsel pressed the point at
oral argument, asserting that the City’s injury was
“caused by the seller’s misrepresentation, which encour­
ages the purchasers not to pay taxes.” Tr. of Oral Arg. 44.
The City, however, affirmatively disavowed below any
reliance on misrepresentations to form the predicate RICO
violation. The alleged false statements, the City there
stated, “are evidence of the scheme to defraud, but are not
part of the fraud itself. . . . [T]he scheme to defraud would
exist even absent the statements.” Record A980. The City
reiterated the point: “The scheme consists of the interstate
sale of cigarettes and the failure to file Jenkins Act reports
indentifying those sales.” Ibid. “Related to the fraud, but
not a circumstance ‘constituting’ the fraud, the defendants
inform customers that [their] purchases will be concealed,
and also seek to convince their customers that no taxes are
owed by claiming, falsely, that the sales are tax-free.” Id.,at A982. Not only did the City disclaim any reliance upon
misrepresentations to the customers to form the predicate
acts under RICO, but the City made clear in its second
amended complaint that its two RICO claims rested solely
on the Jenkins Act violations as the predicate acts. See
——————
device would be available not only to the State, to which the reports
were due, but also to the City, to which Hemi owed no duty under the
Act and to which it owed no taxes.
Cite as: 559 U. S. ____ (2010) 15
Opinion of the Court
Second Amended Compl. ¶¶ 118, 125. Because the City
defined the predicate act before the District Court as
Hemi’s failure to file the Jenkins Act reports, and ex­
pressly disavowed reliance on the alleged misrepresenta­
tions themselves as predicate acts, we decline to consider
Hemi’s alleged misstatements as predicate acts at this late
stage.
* * *
It bears remembering what this case is about. It is
about the RICO liability of a company for lost taxes it had
no obligation to collect, remit, or pay, which harmed a
party to whom it owed no duty. It is about imposing such
liability to substitute for or complement a governing body’s
uncertain ability or desire to collect taxes directly from
those who owe them. And it is about the fact that the
liability comes with treble damages and attorney’s fees
attached. This Court has interpreted RICO broadly,
consistent with its terms, but we have also held that its
reach is limited by the “requirement of a direct causal
connection” between the predicate wrong and the harm.
Anza, 547 U. S., at 460. The City’s injuries here were not
caused directly by the alleged fraud, and thus were not
caused “by reason of” it. The City, therefore, has no RICO
claim.
The judgment of the Court of Appeals for the Second
Circuit is reversed, and the case is remanded for further
proceedings consistent with this opinion.
It is so ordered.
JUSTICE SOTOMAYOR took no part in the consideration
or decision of this case.
Cite as: 559 U. S. ____ (2010) 1
Opinion of GINSBURG, J.
SUPREME COURT OF THE UNITED STATES
_________________
No. 08–969
_________________
HEMI GROUP, LLC AND KAI GACHUPIN,
PETITIONERS v. CITY OF NEW YORK,
NEW YORK
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SECOND CIRCUIT
[January 25, 2010]
JUSTICE GINSBURG, concurring in part and concurring in
the judgment.
As the Court points out, this is a case “about the RICO
liability of a company for lost taxes it had no obligation to
collect, remit, or pay.” Ante, at 15. New York City (or
City) cannot, consistent with the Commerce Clause, com
pel Hemi Group, an out-of-state seller, to collect a City
sales or use tax. See Quill Corp. v. North Dakota, 504
U. S. 298, 301 (1992); National Bellas Hess, Inc. v. De
partment of Revenue of Ill., 386 U. S. 753, 758 (1967).
Unable to impose its tax on Hemi Group, or to require
Hemi Group to collect its tax, New York City is attempting
to use the Racketeer Influenced and Corrupt Act (RICO),
18 U. S. C. §1964(c), in combination with the Jenkins Act,
15 U. S. C. §§375–378, to overcome that disability.
Hemi Group committed fraud only insofar as it violated
the Jenkins Act by failing to report the names and ad
dresses of New York purchasers to New York State. There
is no other grounding for the City’s charge that it was
defrauded by Hemi Group. “Absent the Jenkins Act,
[Hemi Group] would have owed no duty to disclose [its]
sales to anyone, and [its] failure to disclose could not
conceivably be deemed fraud of any kind.” City of New
York v. Smokes-Spirits.com, Inc., 541 F. 3d 425, 460 (CA2
2 HEMI GROUP, LLC v. CITY OF NEW YORK
Opinion of GINSBURG, J.,
2008) (Winter, J., dissenting in part and concurring in
part).
Because “the alleged fraud is based on violations of . . .
the Jenkins Act, . . . the nature and consequences of the
fraud are [properly] determined solely by the scope of that
Act.” Id., at 459. But “conspicuously absent from the
City’s pleadings is any claim brought pursuant to the
Jenkins Act itself, rather than RICO, seeking enforcement
of the Jenkins Act.” Id., at 460. The City thus effectively
admits that its claim is outside the scope of the very stat
ute on which it builds its RICO suit.
I resist reading RICO to allow the City to end-run its
lack of authority to collect tobacco taxes from Hemi Group
or to reshape the “quite limited remedies” Congress has
provided for violations of the Jenkins Act, see ante, at 13,
n. 2. Without subscribing to the broader range of the
Court’s proximate cause analysis, I join the Court’s opin
ion to the extent it is consistent with the above-stated
view, and I concur in the Court’s judgment.
Cite as: 559 U. S. ____ (2010) 1
BREYER, J., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
No. 08–969
_________________
HEMI GROUP, LLC AND KAI GACHUPIN,
PETITIONERS v. CITY OF NEW YORK,
NEW YORK
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SECOND CIRCUIT
[January 25, 2010]
JUSTICE BREYER, with whom JUSTICE STEVENS and
JUSTICE KENNEDY join, dissenting.
In my view, the Hemi Group’s failure to provide New
York State with the names and addresses of its New York
City cigarette customers proximately caused New York
City to lose tobacco tax revenue. I dissent from the
Court’s contrary holding.
I
A
Although the ultimate legal issue is a simple one, the
statutory framework within which it arises is complex. As
the majority points out, ante, at 3, the Racketeer Influ­
enced and Corrupt Organizations Act (RICO), 18 U. S. C.
§§1961–1968, provides a private cause of action (and
treble damages) to “[a]ny person injured in” that person’s
“business or property by reason of” conduct that involves a
“pattern of racketeering activity.” §§1964(c) (emphasis
added), 1962. RICO defines “racketeering activity” to
include violations of various predicate criminal statutes
including mail and wire fraud. §1961(1). The “pattern of
racketeering” at issue here consists of repeated instances
of mail fraud, which in turn consist largely of violations of
the federal Jenkins Act, 15 U. S. C. §§375–378. That Act
2 HEMI GROUP, LLC v. CITY OF NEW YORK
BREYER, J., dissenting
seeks to help States collect tobacco taxes by requiring out­
of-state cigarette sellers, such as Hemi, to file reports with
state tobacco tax administrators identifying the names
and addresses of in-state customers and the amounts they
purchased. The violations consist of Hemi’s intentional
failure to do so.
As the majority points out, we must assume for present
purposes that an intentional failure to file Jenkins Act
reports counts as mail fraud (at least where the failure is
part of a scheme that includes use of the mails). Ante, at
4. Lower courts have sometimes so held. See United
States v. Melvin, 544 F. 2d 767, 773–777 (CA5 1977);
United States v. Brewer, 528 F. 2d 492, 497–498 (CA4
1975). The Court of Appeals here so held. City of New
York v. Smokes-Spirits.com, Inc., 541 F. 3d 425, 446 (CA2
2008). And no one has challenged that holding.
We must also assume that Hemi’s “intentiona[l] con­
ceal[ment]” of the name/address/purchase information,
Second Am. Compl. ¶¶103, 104, is the legal equivalent of
an affirmative representation that Hemi had no New York
City customers. See Restatement (Second) of Torts §551,
p. 119 (1976) (a person “who fails to disclose . . . a fact”
may be “subject to . . . liability” as if “he had represented
the nonexistence of the matter that he has failed to dis­
close”); cf. Stewart v. Wyoming Cattle Ranche Co., 128
U. S. 383, 388 (1888) (concealment or suppression of mate­
rial fact equivalent to a false representation). On these
assumptions, the question before us is whether New York
City’s loss of tax revenues constitutes an injury to its
“business or property by reason of” Hemi’s Jenkins Act
misrepresentations.
B
The case arises as a result of the District Court’s dis­
missal of New York City’s RICO complaint. Fed. Rule Civ.
Proc. 12(b)(6). Hence we must answer the question in
Cite as: 559 U. S. ____ (2010) 3
BREYER, J., dissenting
light of the facts alleged, taking as true the facts pleaded
in the complaint (along with the “RICO statement” sub­
mitted pursuant to the District Court’s rule). Bridge v.
Phoenix Bond & Indemnity Co., 553 U. S. ___, ___, n. 1
(2008) (slip op., at 1, n. 1). Those facts (as I interpret
them) include the following:
1. New York State (or State) and New York City (or City)
both impose tobacco taxes on New York cigarette buy­
ers. Second Am. Compl. ¶37.
2. Both City and State normally collect the taxes from
in-state cigarette sellers, who, in turn, charge retail
customers. Id., ¶¶4, 6.
3. Hemi, an out-of-state company, sells cigarettes over
the Internet to in-state buyers at prices that are lower
than in-state cigarette prices. The difference in price
is almost entirely attributable to the fact that Hemi’s
prices do not include any charge for New York taxes.
Hemi advertises its cigarettes as “tax free” and often
adds that it “does not report any sales activity to any
State taxing authority.” Id., ¶¶2, 6, 108b (internal
quotation marks omitted; emphasis deleted).
4. New York State normally receives Jenkins Act reports
from out-of-state sellers. It is contractually obliged to
pass the information on to New York City (and I as­
sume it normally does so). Id., ¶¶8–9, 11, 54–57.
5. When it receives Jenkins-Act-type information, New
York City writes letters to resident customers asking
them to pay the tobacco tax they owe. As a result,
New York City collects about 40% of the tax due. (By
doing so, in 2005 the City obtained $400,000 out of $1
million owed.) Id., ¶¶58–59.
6. Hemi has consistently and intentionally failed to file
Jenkins Act reports in order to prevent both State and
City from collecting the tobacco taxes that Hemi’s in­
state customers owe and which otherwise many of
those customers would pay. Id., ¶¶13, 24, 58.
4 HEMI GROUP, LLC v. CITY OF NEW YORK
BREYER, J., dissenting
II
A
The majority asks whether New York City stated a valid
cause of action in alleging that it lost tobacco tax revenue
“by reason of” Hemi’s unlawful misrepresentations. The
facts just set forth make clear that we must answer that
question affirmatively. For one thing, no one denies that
Hemi’s misrepresentation was a “but-for” condition of New
York City’s loss. In the absence of the misrepresentation,
i.e., had Hemi told New York State the truth about its
New York City customers, New York City would have
written letters to the purchasers and obtained a signifi­
cant share of the tobacco taxes buyers owed.
For another thing, New York City’s losses are “reasona­
bly foreseeable” results of the misrepresentation. It is
foreseeable that, without the name/address/purchase
information, New York City would not be able to write
successful dunning letters, and it is foreseeable that, with
that information, it would be able to write successful
dunning letters. Indeed, that is a natural inference from,
among other things, the complaint’s assertion that Hemi
advertised that it did not “report” sales information to
“State taxing authorit[ies].” See, e.g., Smith v. Bolles, 132
U. S. 125, 130 (1889) (for causation purposes, “ ‘those
results are proximate which the wrong-doer from his
position must have contemplated as the probable conse­
quence of his fraud or breach of contract’ ” (quoting Crater
v. Binninger, 33 N. J. L. 513, 518 (Ct. Errors and Appeals
1869)); see also W. Keeton, D. Dobbs, R. Keeton, & D.
Owen, Prosser and Keeton on Law of Torts §110, p. 767
(5th ed. 1984) (hereinafter Prosser and Keeton); 3 S.
Speiser, C. Krause, & A. Gans, The American Law of Torts
§11:3, p. 68 (2003) (“By far the most treated and most
discussed aspect of the law of proximate or legal cause is
the so-called doctrine of foreseeability”). But cf. ante, at 9
(“The dissent would have RICO’s proximate cause re­
Cite as: 559 U. S. ____ (2010) 5
BREYER, J., dissenting
quirement turn on foreseeability . . .”).
Further, Hemi misrepresented the relevant facts in
order to bring about New York City’s relevant loss. It
knew the loss would occur; it intended the loss to occur;
one might even say it desired the loss to occur. It is diffi­
cult to find common-law cases denying liability for a
wrongdoer’s intended consequences, particularly where
those consequences are also foreseeable. Cf. Bridge, su
pra, at ___–___ (slip op., at 9–10) (“[S]uppose an enterprise
that wants to get rid of rival businesses mails representa­
tions about them to their customers and suppliers, but not
to the rivals themselves. If the rival businesses lose
money as a result of the misrepresentations, it would
certainly seem that they were injured in their business ‘by
reason of’ a pattern of mail fraud . . .”); N. M. ex rel. Caleb
v. Daniel E., 2008 UT 1, ¶7, n. 3, 175 P. 3d 566, 569, n. 3
(“[I]f an unskilled marksman were to shoot a single bullet
at a distant individual with the intent of killing her, that
individual’s injury or death may not be the natural and
probable consequence of the [shooter’s] act[,] . . . [but] the
harm would not be an accident because the shooter in­
tended the harm, even though the likelihood of success
was improbable”); 1 F. Harper & F. James, The Law
of Torts, §7.13, p. 584 (1956) (explaining that, ordinarily,
“all intended consequences” of an intentional act “are
proximate”).
In addition, New York City’s revenue loss falls squarely
within the bounds of the kinds of harms that the Jenkins
Act (essentially the predicate statute) seeks to prevent.
The statute is entitled “An Act To assist States in collect­
ing sales and use taxes on cigarettes.” 63 Stat. 884. I
have no reason to believe the Act intends any different
result with respect to collection of a city’s tobacco tax
assessed under the authority of state law. See N. Y. Un­
consol. Law Ann. §9436(1) (West Supp. 2009) (authorizing
cities with over one million inhabitants to impose their
6 HEMI GROUP, LLC v. CITY OF NEW YORK
BREYER, J., dissenting
own cigarette taxes). The Restatement (Second) of Torts
explains that where
“a statute requires information to be furnished . . . for
the protection of a particular class of persons, one who
makes a fraudulent misrepresentation . . . is subject to
liability to the persons for pecuniary loss . . . in a
transaction of the kind in which the statute is in­
tended to protect them.” §536, at 77 (1976).
See also §536, Appendix (citing supporting cases in the
Reporter’s Note).
Finally, we have acknowledged that “Congress modeled
§1964(c) on the civil-action provision of the federal anti­
trust laws,” and we have therefore looked to those laws as
an interpretive aid in RICO cases. Holmes v. Securities
Investor Protection Corporation, 503 U. S. 258, 267, 268
(1992). I can find no antitrust analogy that suggests any
lack of causation here, nor has the majority referred to
any such analogical antitrust circumstance.
The upshot is that the harm is foreseeable; it is a conse­
quence that Hemi intended, indeed desired; and it falls
well within the set of risks that Congress sought to pre­
vent. Neither antitrust analogy nor any statutory policy of
which I am aware precludes a finding of “proximate
cause.” I recognize that some of our opinions may be read
to suggest that the words “by reason of” in RICO do not
perfectly track common-law notions of proximate cause.
See, e.g., Bridge, 553 U. S., at ___–___ (slip op., at 14–16).
But where so much basic common law argues in favor of
such a finding, how can the Court avoid that conclusion
here?
B
The majority bases its contrary conclusion upon three
special circumstances and its reading of two of this Court’s
prior cases. In my view, none of the three circumstances
Cite as: 559 U. S. ____ (2010) 7
BREYER, J., dissenting
precludes finding causation (indeed two are not even
relevant to the causation issue). Nor can I find the two
prior cases controlling.
The three circumstances are the following: First, the
majority seems to argue that the intervening voluntary
acts of third parties, namely, the customers’ own inde­
pendent failures to pay the tax, cuts the causal chain.
Ante, at 8 (“[T]he City’s harm was directly caused by the
customers, not Hemi”); see Saugerties Bank v. Delaware &
Hudson Co., 236 N. Y. 425, 430, 141 N. E. 904, 905 (1923)
(third party’s forgery of a bill of lading an intervening
cause); Prosser and Keeton §44, at 313–314 (collecting
cases on intervening intentional or criminal acts). But an
intervening third-party act, even if criminal, does not cut a
causal chain where the intervening act is foreseeable and
the defendant’s conduct increases the risk of its occur­
rence. See Lillie v. Thompson, 332 U. S. 459, 462 (1947)
(per curiam); Horan v. Watertown, 217 Mass. 185, 186, 104
N. E. 464, 465 (1914); see also Restatement (Second) of
Torts §435A, at 454 (1963–1964) (intentional tortfeasor
liable for intended harm “except where the harm results
from an outside force the risk of which is not increased by
the defendant’s act”). Hemi’s act here did increase the
risk that New York City would not be paid; and not only
was the risk foreseeable, but Hemi’s advertising strongly
suggests that Hemi actually knew nonreporting would
likely bring about this very harm.
The majority claims that “directness,” rather than fore­
seeability, should be our guide in assessing proximate
cause, and that the lack of a “direct” relationship in this
case precludes a finding of proximate causation. Ante, at
9–10. But courts used this concept of directness in tort
law to expand liability (for direct consequences) beyond
what was foreseeable, not to eliminate liability for what
was foreseeable. Thus, under the “directness” theory of
proximate causation, there is liability for both “all ‘direct’
8 HEMI GROUP, LLC v. CITY OF NEW YORK
BREYER, J., dissenting
(or ‘directly traceable’) consequences and those indirect
consequences that are foreseeable.” Prosser and Keeton
§42, at 273 (emphasis added); see also id., §43, at 294, and
n. 17 (citing Nunan v. Bennett, 184 Ky. 591, 212 S. W.
570 (1919)). I do not read this Court’s opinions in
Holmes or Anza v. Ideal Steel Supply Corp., 547 U. S. 451(2006), to invoke anything other than this traditional
understanding.
Second, the majority correctly points out that Hemi
misrepresented the situation to the State, not to the
City—a circumstance which, the majority believes, signifi­
cantly separates misrepresentation from harm. Ante, at 8.
But how could that be so? New York State signed a con­
tract promising to relay relevant information to the City.
In respect to that relevant information, the State is a
conduit, indeed roughly analogous to a postal employee.
This Court has recognized specifically that “under the
common law a fraud may be established when the defen­
dant has made use of a third party to reach the target of
the fraud.” Tanner v. United States, 483 U. S. 107, 129
(1987). The treatises say the same. See, e.g., Prosser and
Keeton §107, at 743–745; 26 C. J. S., Fraud §47, p. 1121
(1921) (collecting cases); see also Prosser, Misrepresenta­
tion and Third Parties, 19 Vand. L. Rev. 231, 240–241,
and nn. 56–59, 62–64 (1966) (collecting cases). This Court
has never suggested the contrary, namely, that a defen­
dant is not liable for (foreseeable) harm (intentionally)
caused to the target of a scheme to defraud simply because
the misrepresentation was transmitted via a third (or even
a fourth or fifth) party. Cf. Terry, Intent to Defraud, 25
Yale L. J. 87, 93 (1915) (“When a representation is com­
municated through one person to another in such circum­
stances that it can be deemed to be directed to the latter,
it makes no difference through how many persons or by
how circuitous a route it reaches the latter . . .”).
Third, the majority places great weight upon its view
Cite as: 559 U. S. ____ (2010) 9
BREYER, J., dissenting
that Hemi tried to defraud the State, not the City. Ante,
at 8–9. Hemi, however, sought to defraud both. Third
Amended RICO Statement ¶d (explaining that “[e]very
other State or local government that imposes a use tax on
cigarettes and whose residents purchase cigarettes” from
Hemi is a victim of its scheme to defraud). Hemi sought to
prevent the State from collecting state taxes; and it sought
to prevent the City from collecting city taxes. Here we are
concerned only with the latter. In respect to the latter, the
State was an information conduit. The fact that state
taxes were also involved is beside the point.
The two Supreme Court cases to which the majority
refers involve significantly different causal circumstances.
Ante, at 5–8. The predicate acts in Holmes—the defen­
dant’s acts that led to the plaintiff’s harm—consisted of
securities frauds. The defendant misrepresented the
prospects of one company and misled the investing public
into falsely believing that it could readily buy and sell the
stock of another. When the truth came out, stock prices
fell, investors (specifically, stockbrokers) lost money, and
since the stockbrokers could not pay certain creditors,
those creditors also lost money. 503 U. S., at 262–263.
Claiming subrogation to stand in the shoes of the credi­
tors, the Securities Investor Protection Corporation sued.
Id., at 270–271.
Since the creditors had not bought the securities, there
was little reason to believe the defendant intended their
harm. And the securities statutes seek, first and foremost,
to protect investors, not creditors of those who sell stock to
those investors. The latter harm (a broker’s creditor’s
loss) differs in kind from the harm that the “predicate act”
statute primarily seeks to avoid and that its violation
would ordinarily cause (namely, investors’ stock-related
monetary losses). As Part II–A, supra, points out, neither
of these circumstances is present here.
In Anza, the plaintiff was a business competitor of the
10 HEMI GROUP, LLC v. CITY OF NEW YORK
BREYER, J., dissenting
defendants. The plaintiff claimed that the defendants
falsely told state officials that they did not owe sales tax.
The plaintiff added that, had the defendants paid the tax
they owed, the defendants would have had less money
available to run their business, and the plaintiff conse­
quently would have been able to compete against them
more effectively. 547 U. S., at 454, 457–458.
Again, in Anza the kind of harm that the plaintiff al­
leged is not the kind of harm that the tax statutes primar­
ily seek to prevent. Rather, it alleged a kind of harm
(competitive injury) that tax violations do not ordinarily
cause and which ordinarily flows from the regular opera­
tion of a competitive marketplace. Thus, in both Holmes
and Anza, unlike the present case, plaintiffs alleged spe­
cial harm, neither squarely within the class of harms at
which the relevant statutes were directed, nor of a kind
that typical violators would intend or even foresee.
Bridge, which the majority seeks to distinguish, ante, at
11–12, is a more closely analogous case. The defendants
in that case directed agents to misrepresent to a county
that they qualified as independent bidders at a county-run
property auction. They consequently participated in the
auction. And the plaintiffs, facing additional bidders, lost
some of the property that they otherwise would have
won—all to their financial disadvantage. 553 U. S., at
___–___ (slip op., at 3–4). The harm was foreseeable; it
was intended; and it was precisely the kind of harm that
the county’s bidding rules sought to prevent. Thus this
Court held that the harm was “a foreseeable and natural
consequence of [the defendants’] scheme.” Id., at ___ (slip
op., at 18).
In sum, the majority recognizes that “[p]roximate cause
for RICO purposes . . . should be evaluated in light of its
common law foundations,” ante, at 6, but those founda­
tions do not support the majority’s view. Moreover, the
majority’s rationale would free from RICO liability defen­
Cite as: 559 U. S. ____ (2010) 11
BREYER, J., dissenting
dants who would appear to fall within its intended scope.
Consider, for example, a group of defendants who use a
marketing firm (in RICO terms, an “enterprise”) to perpe­
trate a variation on a “pump and dump” scheme. See, e.g.,
United States v. Salmonese, 352 F. 3d 608, 612 (CA2
2003). They deliberately and repeatedly make egregiously
fraudulent misrepresentations to inflate the price of secu­
rities that, unbeknownst to investors, they own. After the
stock price rises, the defendants sell at an artificial profit.
When the fraud is revealed, the price crashes, to the inves­
tors’ detriment. Suppose the defendants have intention­
ally spoken directly only to intermediaries who simply
repeated the information to potential investors, and have
not had any contact with the investors themselves. Under
the majority’s reasoning, these defendants apparently did
not proximately cause the investors’ losses and are not
liable under RICO.
III
If there is causation, we must decide whether, for RICO
purposes, the City’s loss of tax revenue is “ ‘business or
property’ under 18 U. S. C. §1964(c).” Ante, at 5 (acknowl­
edging, but not reaching, this second issue). The question
has led to concern among the lower courts. Some fear that
an affirmative answer would turn RICO into a tax collec­
tion statute, permitting States to bring RICO actions and
recover treble damages for behavior that amounts to no
more than a failure to pay taxes due. See, e.g., Michigan,
Dept. of Treasury, Revenue Div. v. Fawaz, No. 86–1809,
1988 WL 44736, *2 (CA6 1988) (holding that tax revenue
is not RICO “property” lest district courts become “collec­
tion agencies for unpaid state taxes”); Illinois Dept. of
Revenue v. Phillips, 771 F. 2d 312, 316, 312 (CA7 1985)
(holding, “reluctantly,” that “a state’s Department of
Revenue may file suit in federal court for treble damages
under [RICO] against a retailer who files fraudulent state
12 HEMI GROUP, LLC v. CITY OF NEW YORK
BREYER, J., dissenting
sales tax returns”).
In a related context, however, the Department of Justice
has taken steps to avoid the “tax collection agency” prob­
lem without reading all tax-related frauds out of similar
federal criminal statutes. The Department’s prosecution
guidelines require prosecutors considering a tax-related
mail fraud or wire fraud or bank fraud prosecution (or a
related RICO prosecution) to obtain approval from high­
level Department officials. And those guidelines specify
that the Department will grant that approval only where
there is at issue “a large fraud loss or a substantial
pattern of conduct” and will not do so, absent “unusual
circumstances,” in cases involving simply “one person’s
tax liability.” Dept. of Justice, United States Attorneys’
Manual §6–4.210(A) (2007), online at http://www.justice.
gov/usao/eousa/foia_reading_room/usam/title6/4mtax.htm
(as visited Jan. 20, 2010, and available in Clerk of Court’s
case file); see also §6–4.210(B) (explaining that the De­
partment “will not authorize the use of mail, wire or bank
fraud charges to convert routine tax prosecutions into
RICO . . . cases”).
This case involves an extensive pattern of fraudulent
conduct, large revenue losses, and many different unre­
lated potential taxpayers. The Department’s guidelines
would appear to authorize prosecution in these circum­
stances. And limiting my consideration to these circum­
stances, I would find that this RICO complaint asserts a
valid harm to “business or property.” I need not and do
not express a view as to how or whether RICO’s civil
action provisions apply to simpler instances of individual
tax liability.
This conclusion is virtually compelled by Pasquantino v.
United States, 544 U. S. 349 (2005), a case that we decided
only five years ago. We there pointed out that the right to
uncollected taxes is an “entitlement to collect money . . . ,
the possession of which is ‘something of value.’ ” Id., at
Cite as: 559 U. S. ____ (2010) 13
BREYER, J., dissenting
355 (quoting McNally v. United States, 483 U. S. 350, 358
(1987)). Such an entitlement “has long been thought to be
a species of property.” 544 U. S., at 356 (citing 3 W. Black­
stone, Commentaries on the Laws of England 153–155
(1768)). And “fraud at common law included a scheme to
deprive a victim of his entitlement to money.” 544 U. S.,
at 356. We observed that tax evasion “inflict[s] an eco­
nomic injury no less than” the “embezzle[ment] [of] funds
from the . . . treasury.” Ibid. And we consequently held
that “Canada’s right to uncollected excise taxes on the
liquor petitioners imported into Canada” is “ ‘property’ ”
within the terms of the mail fraud statute. Id., at 355.
Hemi points in reply to our decision in Hawaii v. Stan
dard Oil Co. of Cal., 405 U. S. 251 (1972). But that case
involved not a loss of tax revenues, but “injury to the
general economy of a State”—insofar as it was threatened
by violations of antitrust law. Id., at 260. Hawaii’s inter­
est, both more general and derivative of harm to individ­
ual businesses, differs significantly from the particular tax
loss at issue in Pasquantino and directly at issue here.
We have previously made clear that the compensable
injury for RICO purposes is the harm caused by the predi­
cate acts. See generally Sedima, S. P. R. L. v. Imrex Co.,
473 U. S. 479, 495–496 (1985); cf. Cleveland v. United
States, 531 U. S. 12, 25 (2000). I can find no convincing
reason in the context of this case to distinguish in the
circumstances present here between “property” as used in
the mail fraud statute and “property” as used in RICO.
Hence, I would postpone for another day the question
whether RICO covers instances where little more than the
liability of an individual taxpayer is at issue. And I would
find in the respondent’s favor here.
With respect, I dissent.