Mail and Wire Fraud

The extensive use of RICO in the civil context is almost solely attributable to the inclusion of mail and wire fraud as predicate acts. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 500 (1985). The mail and wire fraud statutes essentially make it criminal for any one to use the mails or wires in furtherance of a scheme to defraud. Note that the fraudulent statements themselves need not be transmitted by mail or wire; it is only required that the scheme to defraud be advanced, concealed or furthered by the use of the U.S. mail or wires. See 18 U.S.C. §§ 1341, 1343. Because every business or corporation in the United States uses the mails or wires to make money, any business who allegedly engages in common law fraud arguably violates the federal mail and wire fraud statutes. As a result, almost any business that allegedly engages in common law fraud can theoretically be sued under the RICO Act.

One may violate the mail or wire fraud statutes even if there is no affirmative misrepresentation.  A mail or wire fraud violation can be premised on a non-disclosure if there is an independent duty of disclosure that the defendant has breached.  Eller v. EquiTrust Life Ins. Co., 778 F.3d 1089, 1092 (9th Cir. 2015).  Absent an independent duty, such as a fiduciary duty or an explicit statutory duty, failure to disclose cannot be the basis of a mail or wire fraud violation.  Id.; see also Crawford’s Auto Ctr., Inc. v. State Farm Mutual Automobile Ins. Co., 945 F.3d 1150, 1159 (11th Cir. 2019).

There are other significant limitations on the mail and wire fraud statutes. Mailings that increase the probability that the perpetrator will be detected and apprehended are not in furtherance of a scheme to defraud and do not constitute mail fraud.  Lundy v. Catholic Health Systems of Long Island, Inc., 711 F. 3d 106, 119 (2d Cir. 2013).  As general rule, a scheme to defraud must relate to past or presently existing facts. American Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1292 (11th Cir. 2010) (“a plaintiff must allege that some kind of deceptive conduct occurred in order to plead a RICO violation predicated on mail fraud”). “[I]t is settled law that ‘a promise of future action or a prediction of future events cannot, standing alone, be a basis for fraud because it is not a representation, there is no right to rely on it, and it is not false when made.'” Hall v. Burger King Corp., 912 F.Supp. 1509, 1544 (S.D. Fla. 1995). Irregularities in state court proceedings generally do not violate the mail or wire fraud statutes.  See Alexander v. Rosen, 804 F.3d 1203, 1207 (6th Cir. 2015), cert. denied, 136 S.Ct. 2392 (2016) (the father (plaintiff) failed to plead violations of the mail / wire fraud statutes where his allegations boiled down to claims that the defendant judicial officers did not adequately investigate his case, tolerated procedural irregularities in his state child custody proceeding, and miscalculated his child support obligation).  Frivolous, fraudulent, or baseless litigation activities — without more — cannot constitute a RICO predicate act.  Kim v. Kimm, 884 F3d 98, 104 (2d Cir. 2018); see also Butcher v. Wendt975 F.3d 236, 241 (2d Cir. 2020) (same); UMB Bank v. Guerin, 89 F.4th 1047, 1055 (8th Cir. 2024) (same); Efron v. UBS Fin. Serv. Inc. of Puerto Rico, 96 F.4th 430, 439 (1st Cir. 2024) (the plaintiff’s “conclusory allegations that [the defendant] nefariously plotted against him [did] not plausibly demonstrate that [the defendant] initiated FINRA litigation with intent to defraud”).  In the context of RICO, one court of appeals has stated: “[b]reach of contract is not fraud, and a series of broken promises therefore is not a pattern of fraud. It is correspondingly difficult to recast a dispute about broken promises into a claim of racketeering under RICO.” Perlman v. Zell, 185 F.3d 850, 853 (7th Cir. 1999)); see also Sanchez v. Triple-S Management, Corp., 492 F.3d 1, 12 (1st Cir. 2007) (“breach of contract itself [does not] constitute a scheme to defraud”). Thus, if an advertisement merely promises or opines that a product will perform in a certain way, it may be difficult to prove that the business has engaged in a scheme to defraud. The business must make false factual representations, e.g., falsely say that a survey established that 3 out of 4 dentists prefer brand X toothpaste, when in fact the survey established that 3 out of 4 disfavored use of brand X toothpaste. The RICO Act is almost single-handedly responsible for the small print disclaimers that appear on every newspaper and T.V. advertisement and for the fast-talking and whispered disclaimers that we hear on the radio. All of those disclaimers essentially say that all the statements made in the advertisement are opinions or are based upon assumptions that may or may not apply to the circumstances of any individual consumer. So, the next time you’re squinting to read the fine-print or waiting for the radio announcer to run out of breath, you can thank the RICO Act.

Perhaps the biggest limitation on a plaintiff’s ability to convert any common law fraud claim into a RICO claim predicated on the federal mail and wire fraud statutes is the aversion most federal courts have toward RICO claims predicated only on mail and wire fraud violations. The Supreme Court commented on this aversion in Sedima:

Underlying the Court of Appeals’ [dismissal of the claim] was its distress at the “extraordinary, if not outrageous,” uses to which civil RICO has been put. [Citation omitted.] Instead of being used against mobsters and organized criminals, it has become a tool for everyday fraud cases brought against “respected and legitimate enterprises.” [Citation omitted.] . . .

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The “extraordinary” uses to which civil RICO has been put appear to be primarily the result of the breadth of the predicate offenses, in particular the inclusion of wire [and] mail . . . fraud. . . .

473 U.S. at 499-500; see also Midwest Grinding, 976 F.2d at 1025 (“. . . we do not look favorably upon many instances of mail and wire fraud to form a pattern” (citing numerous cases).) Thus, even if a RICO plaintiff has clearly alleged a pattern of mail and wire fraud violations, courts may still view the RICO claim as beyond the intended scope of the RICO Act and may actively try to find a way to avoid application of the RICO Act to what is more properly a simple claim of common law fraud. Plaintiffs should always attempt to base their RICO claims on more than just alleged violations of the mail and wire fraud statutes. With hard work, a plaintiff should be able to identify other acts of racketeering under almost any factual scenario.

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