reliance

Issues

Ideal Steel Supply Corporation and National Steel Supply Inc. were competitors for many years in the New York area, with facilities in Queens and later the Bronx. They each sold steel mill products and other hardware, and the owners were even related by marriage. As Ideal Steel’s sales in the Bronx dropped and National Steel’s increased, despite both companies charging the same price for their product, Ideal Steel became suspicious. In particular, Ideal Steel was concerned about National Steel’s “cash, no tax” policy, in which customers of National Steel that paid with cash did not have to pay the sales tax required by New York State. Ideal Steel filed a civil suit in federal district court alleging that the “cash, no tax” policy constituted racketeering under the Racketeer Influenced and Corrupt Organizations Act, in that the failure to charge state sales tax and the filing of false sales tax returns was a pattern of mail and wire fraud intended to give National Steel an unfair competitive advantage over Ideal Steel. The district court dismissed Ideal Steel’s claim, ruling that Ideal Steel failed to allege that there was a sufficient connection between National Steel’s alleged illegal conduct and the harm to its business or lost profits. The Court of Appeals for the Second Circuit reversed and ordered that the suit should proceed, ruling that it was sufficient for Ideal Steel to prove that New York State relied on National Steel’s fraudulent conduct, which allowed the scheme to continue, and ultimately led to the harms alleged. The United States Supreme Court must now examine the Racketeer Influenced and Corrupt Organizations Act and determine whether a company such as Ideal Steel is injured by such violations where the company is not directly defrauded and did not rely on the illegal acts.  

Questions as Framed for the Court by the Parties

Additional Resources

Issues

This case concerns a civil claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Cook County, Illinois auctions tax liens to the public. The winning bidder pays the back taxes and can then recover the amount of the delinquent taxes from the property owner, along with a penalty. If the taxpayer doesn't pay, the winning bidder gains ownership of the property on which the lien was placed. Multiple bidders often tie in the auction, so bidders must submit affidavits that they are not using agents to gain an unfair advantage through relation with other bidders. Phoenix Bond and Indemnity Company ("Phoenix") brought a RICO suit against John Bridge for mail fraud, alleging that he submitted false affidavits which stated that it was unrelated to other bidders. The District Court dismissed the suit, stating that Phoenix was not the party that relied on the fraudulent mailings and therefore lacked standing to sue Bridge. The Court of Appeals reversed. The Supreme Court's decision in this case will determine whether only those parties who were the target of a fraudulent communication can bring a civil suit seeking damages under RICO.

Questions as Framed for the Court by the Parties

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