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Plaintiff Failed to Satisfy Proximate Cause Test in Jackson v NAACP

March 13, 2014

The court affirmed the lower court’s dismissal of Jackson’s RICO claim finding the plaintiff did not have a cause of action under RICO because the asserted harm (the employer’s inability to reinstate her) is an action entirely distinct from the alleged predicate acts of wire and mail fraud. The plaintiff failed to meet the proximate cause test set forth in Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461 (2006).

The Plaintiffs were employed by the Houston Branch of the NAACP, which was led by its Executive Director Yolanda Smith. Jackson and the other plaintiff was terminated when the funding for certain grants expired. The Texas Access to Justice Foundation (TAJF) provided grants to the Branch. It was found that the branch office had not abided by the terms and provisions that governed the grant money and Smith had allegedly committed fraud against the TAJF, thus leading to the plaintiffs’ loss of employment. Both re-applied for positions and were denied. Jackson filed a complaint with the National Labor Relations Board (NLRB) which ruled in July of 2011 that the branch committed an unfair labor practice by refusing to re-hire Jackson because of her complaints to the branch’s Executive Committee about the lack of funds for payroll and threats of legal action. The NLRB ordered back pay for Jackson and her reinstatement, and the NAACP lacked funding to rehire.

The court stated that a civil RICO claim a plaintiff must satisfy two elements to establish RICO standing: injury and causation. The court also stated that it has noted that “[i]njury to mere expectancy interests or to an intangible property interest, is not sufficient to confer RICO standing.” Addressing the causation requirement, a RICO predicate offense must “not only [be] a ‘but for’ cause of [plaintiff’s] injury, but [it must be] the proximate cause as well.” In assessing proximate cause, “the central question [we] must ask is whether the alleged violation led directly to the plaintiff’s injuries.” Applying the proximate cause standard from Anza and Holmes, the court concluded that the alleged RICO violation, based on the predicate acts of mail and wire fraud committed by Smith against TJAF, did not proximately cause Jackson’s alleged injury.

Jackson asserted injury because the branch has lost its grant funding and could not reinstate her pursuant to the NLRB order. The court assumed, without deciding, that Jackson’s interest in the NLRB order established a sufficient injury for RICO standing but found that the cause of Jackson’s asserted harm (the Branch’s inability to reinstate her) is an action entirely distinct from the alleged RICO violations (the predicate acts of wire and mail fraud by Smith against TAJF). Jackson was neither the target nor the victim of the predicate acts. The Branch and TJAF, if anyone, were the direct victims of the RICO activity.

Jackson’s injury, properly characterized as her loss of employment, “does not flow from” Smith’s alleged wire and mail fraud committed against TAJF. Jackson failed to recognize that TAJF based its decision to pull the funding predominately upon acts unrelated to the predicate RICO acts. Even if TJAF had pulled its funding because of the predicate acts, Jackson’s alleged injury is proximately caused only by the discovery of these acts by TJAF and the consequences following this discovery, not by the alleged RICO violations. The relationship between the harm to Jackson and the alleged RICO activity is too attenuated here to support a finding of proximate causation sufficient to confer standing.

The court concluded that because Jackson could not establish proximate causation between her asserted injury and the RICO activity, Jackson failed to sufficiently allege facts that support standing to bring a civil RICO claim, and the lower court properly dismissed Jackson’s RICO claim.