Chief Judge Brown found that plaintiffs had failed to satisfy Rule 8’s pleading standard, as recently re-articulated by the Supreme Court in the Bell Atlantic v. Twombly case. Finding that plaintiffs’ factual allegations and deductions were flawed, Judge Brown noted that plaintiffs’ enterprise allegations simply did not lead to the conclusion that subgroups of defendants were acting in the coordinated fashion of a RICO enterprise. See, e.g., Slip Op. at 45 (“In sum, the picture painted by Plaintiffs’ factual allegations depicts a kaleidoscope of entities out of which Plaintiffs carve, wholly artificially, groups which Plaintiffs term as Broker-centered Enterprises.” The picture is equally amenable to any other mode of ‘carving.'”). At most, according to Judge Brown, plaintiffs’ allegations depict “a pernicious industry practice.” And, as he noted, the RICO statute was not enacted to penalize pernicious industry practices. Id. at 46. Second, Judge Brown concluded that plaintiffs had failed to plead adequately the “enterprise” and “conduct” elements of a RICO violation. Rather than pleading the requisite nonconclusory allegations, Judge Brown found that plaintiffs had offered nothing more than inferences upon inferences and wholly conclusory allegations. Rejecting this approach, Judge Brown wrote, “[a] legal adjudication cannot rest on any such ‘house that Jack built’ foundation . . . .” Id. at 58. Noting that plaintiffs had been given at least four opportunities to plead their claims, Judge Brown dismissed the RICO claims with prejudice, leaving only the state law claims remaining in the commercial case. (A single federal count pertaining to ERISA claims remains in the Employee Benefits case.) Judge Brown declined to exercise supplemental jurisdiction over the state law claims in the commercial case and, therefore, dismissed the case in its entirety.
Judge Dismisses Federal RICO Claims in Insurance Brokerage Antitrust Case
In a 73-page exhaustive treatment of RICO pleading standards, Chief Judge Brown of the District of New Jersey dismissed with prejudice the federal RICO claims levied by putative class plaintiffs against most of the nation’s large insurers and insurance brokers. This decision, unless appealed, signals the end of the three years of civil class litigation spawned by then-New York Attorney General Eliot Spitzer’s investigation of contingent commission arrangements in the insurance brokerage industry.
