Antitrust Law Daily Racketeering claims rejected in dispute over purported use of OEM parts
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Tuesday, December 13, 2016

Racketeering claims rejected in dispute over purported use of OEM parts

By Mark Engstrom, J.D.

Customers of a California Mercedes-Benz dealership (Autobahn, Inc.) failed to sufficiently allege that six individuals had conducted the affairs of four RICO enterprises that purportedly made false claims about the use of OEM (original equipment manufacturer) parts in all repairs that were done at the dealership, the federal district court in Oakland, California, has ruled. Because the plaintiffs did not allege that the defendants had conducted or participated in conduct beyond the ordinary business of the dealership—and failed to provide specific details about the fraudulent acts that the enterprises purportedly committed—their RICO claims were dismissed with prejudice (Ferrari v. Mercedes-Benz USA, LLC, December 12, 2016, Rogers, Y.).

According to the court, the plaintiffs’ allegations about who or what constituted the RICO enterprise—and how the six individuals were liable for the conduct of that enterprise—were "vague, confusing, and contradictory." The allegations, for example, did not describe the conduct of the three defendants who had become the CEO of Mercedes-Benz USA (MBUSA), an alleged enterprise. Instead, they asserted that one CEO had "influenced" and another had "corruptly influenced" the misconduct of MBUSA. The allegations against the third CEO had simply incorporated the deficient allegations that were asserted against the other two. According to the court, the plaintiffs’ allegations were insufficient to support the assertion that the CEOs had conducted or participated in the conduct of a RICO enterprise, rather than the business of MBUSA, separate and apart from the alleged acts of racketeering.

With respect to two other defendants—officers of the Autobahn dealership—the plaintiffs identified the dealership as the enterprise and offered more detailed allegations about the officers’ conduct, but they still failed to state a valid RICO claim. Even if the complaint sufficiently alleged that the two officers had played a role in the conduct of the dealership enterprise (distinct from their role as officers of the dealership), the complaint did not allege the predicate acts of mail and wire fraud with the requisite specificity.

With respect to the sixth individual defendant, the plaintiffs alleged that he had "corruptly influenced" two different enterprises. However, the complaint failed to allege the specific details of any mail or wire fraud that the individual or the enterprises had engaged in.

Ultimately, the plaintiffs failed to sufficiently allege that the individual defendants had participated in a pattern of racketeering that was conducted by a RICO enterprise, according to the court. Dismissal was therefore warranted.

The case is No. 5-cv-04379-YGR.

Attorneys: Herman Franck (Franck and Associates) for Steve Ferrari. Robert B. Hawk (Hogan Lovells US LLP) for Mercedes-Benz USA, LLC. Bruce Grant Nye (Adams Nye Becht LLP) for Autobahn, Inc., d/b/a Autobahn Motors.

Companies: Mercedes-Benz-USA, LLC; Autobahn, Inc., d/b/a Autobahn Motors; Sonic Automotive Inc.; Speedway Motorsports, Inc.

MainStory: TopStory RICO CaliforniaNews

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