"The elements ofa civil RICO claim are ... :(1) conduct (2) ofan enterprise (3) through a pattern (4) ofracketeering activity (known as 'predicate acts') (5) causing injury to plaintiffs 'business or property'." Living Designs, Inc. v. E.!. Dupont de Nemours, 431 F.3d 353, 361 (9th Cir. 2005)(citing Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996)(citing 18 U.S.C. § 1964(c), 1962(c». To plead causation, Plaintiffs must allege that Defendants' violation was both the direct and the proximate cause of a concrete financial injury. See Resolution Trust Corp. v. Keating, 186 F.3d 1110,1117 (9th Cif. 1999).
All RICO claims involving fraud must be alleged with particularity under Rule 9(b), and require plaintiffs to allege "the time, place, manner of each predicate act, the nature of the scheme involved, and the role of each defendant in the scheme." Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397,405 (9th Cir. 1991). Furthermore, "Rule 9(b) does not allow a complaint to merely lump multiple defendants together." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). Plaintiffs are "require[d] to differentiate ... allegations when suing more than one defendant ... and [mustj inform each defendant separately of the allegations surrounding [that defendant's] alleged participation in the fraud." Swartz, 476 F.3d at 764-65 (citing Haskin v. IU. Reynolds Tobacco Co., 995 F. Supp. 1437, 1439 (M.D. Fla. 1998)(citation, quotation omitted).
Plaintiffs' RICO claims attempt to establish, in a general fashion, the time, place, manner of each predicate act, the nature of the scheme involved, and the role of each defendant in the scheme. The primary racketeering activity alleged is the Defendants' "ongoing scheme to deiraud and actually defrauding purchasers of the books over at least an eight year period and continuing to this day, where they continued to misrepresent that the contents of [the Books] were true, nonfiction accounts ofwhat really happened, when, in fact, the contents were false and the accounts did not happen." Essentially, Plaintiffs contend that Defendants knew the truth, but portrayed Mortenson into a hero in ordcr to persuade people to buy the Books, which financially benefitted the Defendants.
Plaintiffs begin their factual accusations by listing several alleged fabrications within the Books, which the enterprise wrote. Plaintiffs next describe numerous lies said to have taken place after the Books were written. Examples include CAl purchasing many of the Books from outlets, the enterprise using "fraudulent speaking engagements," paying Mortenson's expenses, and advertising and promoting the Books. Many ofthese purported lies do not actually appear to be untruthful or illegal, and are overly vague.
The Complaint rests on two primary arguments: (1) the enterprise advertised and promoted the books; and (2) the enterprise caused Mortenson to make several public statements regarding good works he performed which were purely fabricated. Plaintiffs also allege, "[o]n information and belief, [that] Mortenson ... transferred funds from his book sales to MC and otherwise involved MC in the marketing and sale ofthe books."
The Complaint states, in support of causation, that the individual Plaintiffs purchased the Books because it was "represented to [them] as true." The RICO claims assert: "There is no question but that Plaintiffs did rely on such fraud and misrepresentations o f the enterprise so as to show causation for their individual damages, but there is no requirement to show that every victim to the enterprise's mail fraud and wire fraud relied upon the fraud in order to recover."
Plaintiffs assert they suffered concrete financial loss when they paid full price for a nonfiction book when it was fiction. The financial loss is alleged to be "the out-of-pocket loss, ... minus the value ofthe false and fraudulent "nonfiction" books, which is [characterized as] zero."
The RICO claims are fraught with shortcomings, including failure to satisfy causal elements, failure to specify the roles o f the Defendants, not adequately pleading enterprise theories, and failure to specify an actionable, identifiable racketeering activity. Failure to adequately address the causal elements is the ultimate and fatal flaw. The Complaint does not state, nor is it possible to ascertain, whether Plaintiffs would have purchased the Books if: (I) the Books were labeled or marketed as fiction; or (2) the readers knew portions of the Books, asclaimed,werefabricated. Plaintiffs'overlybroadstatementsthattheypaid approximately $15 for the Books because they were represented as true does not suffice. Additionally, Plaintiffs fail to allege when they purchased the Books, which is crucial in analyzing this case. In fact, Plaintiffs never allege they visited CArs website or saw or heard any statements made by it before purchasing the Books.
