state law to sue
individually for their gambling losses does not equate with the standing
requirement of § 1964(c).
Moreover, although this Court agrees that Plaintiffs have stated a cause
of action for illegal gambling by Defendants, the act of gambling per se is
not sufficient to show an injuxy to one's business or property under RICO.
To confer standing under § 1964(c), Plaintiffs must show that they
have suffered an economic harm to business or property that would
constitute the sort of injury contemplated under § 1964(c) as, for
example, in the case of a fraudulent gambling scheme.
Here, Plaintiffs allege no fraud or dishonesty with respect to
Defendants' gambling activity. Plaintiffs struck a bargain with Defendants
and received the benefit of their bargain. They paid for a pack of cards
which included a bona fide "chance to win." See Allard v. Flamingo Hilton
(In re Chomakos) 69 F.3d 769, 770 (6th Cir. 1995). Plaintiffs knew when
they made their purchase that they might not draw a "chase card" and that
the most they might receive would be a pack of non-chase trading cards.
There is no allegation that Defendants have engaged in any sort of
fraudulent or dishonest conduct such as misrepresenting to purchasers the
odds of winning a chase card. Significantly, Plaintiffs concede that in
this case they would not claim any injury to their business or property if
Defendants' alleged gambling activity were legal under state law.
Plaintiffs' reliance on Sedima, S.P.R.L v. Imrex Co., Inc., 473 U.S. 479,
496 (1985), is misplaced. In Sedima, the plaintiff was defrauded out of
proceeds of a joint venture with Imrex because of fraudulent billings for
electronic components charged by Imrex. Clearly, Sedima suffered injury to
its business, unlike the instant case which contains no allegation of fraud
or dishonesty by Defendants.
Plaintiffs' last argument involves the "verboten" nature of gambling
activity. State law may proscribe gambling irrespective of whether or not
it causes injury to business or property of persons within the meaning of
§ 1964(c) (i.e. that elements of fraud are present). A state may base
its gambling prohibition on public policy grounds, which may include
religious, cultural, or moral considerations. However, notwithstanding a
state's condemnation of such racketeering activity for policy reasons, the
Court must look to a different test Section 1964(c) gives standing to
private persons not because of the objectionable nature of the racketeering
conduct, but because a person's business or property is injured by the
activity. Since Plaintiffs have not alleged such injury, the Court
dismisses the RICO cause of action from each of the pending cases.
Moreover, the Court takes into consideration the fact that Plaintiffs have
had the opportunity to amend their complaint for many months, including the
past several weeks during which they have been on notice of this procedural
defect. They have failed to allege even a scintilla of fraudulent conduct
by Defendants. Therefore, the Court dismisses the RICO claim without leave
to amend. See Price v. Pinnacle Brands, Inc., 138 F.3d 602 (5th Cir.
3. § 1962 RICO Claim
Having determined that Plaintiffs lack standing under § 1964(c), the
Court need not, and therefore does not, analyze further the elements
required by § 1962. See Id.
B. Jurisdiction over State Law Pending Claims
The complaint alleges residence facts which rule out diversity
jurisdiction under 28 U.S.C. § 1332. The Court, having dismissed
Plaintiffs' RICO cause of action, now also lacks federal subject matter
jurisdiction over these cases under 28 U.S.C. § 1331. It declines to
exercise supplemental jurisdiction over the pendant state claims under
28 U.S.C. § 1367 and dismisses them herewith without prejudice.
Having re-reviewed the pleadings and memoranda heretofore filed, the
papers in response to the Court's OSC, having heard oral presentations by
the parties on June 7, 2000, and being fully advised in the premises, NOW
IT IS HEREBY ORDERED:
(1) The prior order of May 14, 1999 denying Defendants' Fed.
R. Civ. P. 12(b)(6) motion to dismiss is hereby vacated
nunc pro tunc;
(2) The RICO claim is dismissed pursuant to Fed. R. Civ. P.
12(b)(6) without leave to amend on the ground that
Plaintiffs lack standing as required by § 1964(c) of
(3) All pendant claims are dismissed without prejudice
pursuant to 28 U.S.C. § 1367.
(4) The Clerk shall close the file.
IT IS SO ORDERED.