On August 25, the Eleventh Circuit upheld the dismissal of putative class claims brought against Petland for alleged violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), concluding that the plaintiff purchaser failed to plausibly allege the existence of a RICO enterprise or the requisite predicate acts.
- Plaintiff Rosalba Cisneros’s lawsuit arose following her purchase of a puppy from Petland in late 2015. According to her complaint, the dog died less than a week after it was purchased, despite Petland’s representations that a veterinarian had certified the puppy as healthy.
- Ms. Cisneros filed a putative class action against Petland, asserting a RICO claim based on the theory that the puppy’s death stemmed from a nationwide fraud scheme between Petland and its franchisees. Specifically, she claimed that Petland and the franchisees intentionally purchased sick dogs from “puppy mills,” paid veterinarians to “rubber-stamp” certificates stating that the animals were healthy, and then sold them for premium prices. She further claimed that the parties engaged in a pattern of obfuscation after the sale to aid Petland in avoiding its warranties. Petland moved to dismiss for failure to state a claim.
- The Northern District of Georgia granted Petland’s motion, finding the plaintiff failed to plausibly allege the existence of a RICO enterprise or that the defendants engaged in the requisite predicate acts. On appeal, the Eleventh Circuit affirmed the district court.
- The Eleventh Circuit held that Ms. Cisneros failed to plausibly allege a RICO “enterprise” under 18 U.S.C. § 1961(4), which requires, among other things, that the plaintiff establish that the participants in the enterprise share a “qualifying purpose.” The court began its analysis of the issue by making clear that merely alleging that the participants had a “generally shared interest in making money will not suffice.” Rather, “where the participants’ ultimate purpose is to make money for themselves, a RICO plaintiff must plausibly allege that the participants shared the purpose of enriching themselves through a particular criminal course of conduct.” The court concluded that the complaint “alleged no facts that plausibly support the inference that the defendants were trying to make money in pet sales by fraud, which is a common purpose sufficient to find a RICO enterprise as opposed to the ‘obvious alternative explanation,’ that they were simply trying to make money in pet sales, which is not.”
- In so doing, the court expressly rejected plaintiff’s attempt to recast the defendants’ otherwise “anodyne franchise business model” as a criminal enterprise, noting that such allegations “could be made about countless law-abiding companies . . . .” The court also affirmed the core principle that a RICO enterprise must “be distinct from any individual defendant—a person cannot conspire with itself.” As a result, otherwise adequate allegations that a corporate defendant committed fraud through its agents or employees acting within the scope of their roles for the corporation are not enough to substantiate an association-in-fact enterprise.
- The Eleventh Circuit also agreed with the district court that the plaintiff had not pled with sufficient particularity that the defendants engaged in a pattern of racketeering activity. To meet this demanding requirement, a plaintiff must adequately plead at least two predicate acts of racketeering activity and must do so with sufficient particularity “with respect to each predicate act to make it independently indictable as a crime.” Additionally, the plaintiff must “plausibly allege that the defendant is engaged in criminal conduct of a continuing nature”—a requirement that is measured “in years, not in weeks” (quotation marks omitted). The court concluded that the plaintiff failed to adequately plead a sufficient number of qualified predicate acts or show how those acts occurred over a sufficiently “substantial period of time.”
- The Eleventh Circuit’s opinion highlights some of the difficulties plaintiffs in consumer class actions face when trying to bring claims for alleged violations of RICO. While such claims may be desirable from the plaintiffs’ perspective because RICO allows for nationwide service of process and treble damages, they are difficult to plead (much less prove).
- The case is Cisneros v. Petland, Inc., No. 18-12064. Read more here.