Mason v. Ashbritt, Inc.

Background

Craig Mason filed a proposed class action concerning property damage allegedly caused during cleanup and debris-removal work after the October 2017 Northern California wildfires. The opinion states that AshBritt, Inc. contracted with the Army Corps of Engineers to manage the project and subcontracted with Tetra Tech, Inc. to collect and test soil, among other services.

Mason alleged that the defendants and their subcontractors routinely removed excessive amounts of soil without first testing for contamination, removed trees that did not meet the contract’s removal criteria, and left contaminated soil on properties. He further alleged that the defendants submitted false reports and certifications to the federal government stating that required work and contamination testing had been completed. According to Mason, the conduct increased the defendants’ profits because the government paid based on the weight of removed material.

Mason asserted claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), including a claim under 18 U.S.C. § 1962(c) and a conspiracy claim under § 1962(d), based on alleged mail and wire fraud. He also asserted state-law claims for trespass, conversion, trespass to chattels, and violations of California’s Unfair Competition Law. The defendants moved to dismiss the RICO claims under Federal Rules of Civil Procedure 9(b) and 12(b)(6), which tests whether a complaint adequately states a legally recognized claim.

Judicial Notice Request

Mason asked the court to take judicial notice of the Army Corps of Engineers contract. The court concluded that it could consider the contract under the incorporation-by-reference doctrine because the complaint alleged its contents and no party challenged its authenticity. The court therefore denied Mason’s request for judicial notice as moot.

RICO Proximate Cause

The court held that Mason had not pleaded the proximate causation required for a civil RICO claim. RICO requires a plaintiff to show that the alleged racketeering activity directly caused an injury to the plaintiff’s business or property. The court explained that proximate cause requires a direct relationship between the alleged wrongful conduct and the claimed injury.

The court characterized the alleged scheme as one directed at the federal government: according to the complaint, the defendants allegedly made false statements to the government to obtain payment for removing material that should not have been removed. Mason’s property injuries were described as consequences of that alleged fraud, but the government was the direct victim because it allegedly paid for the improper work. The court therefore concluded that Mason and the proposed class were not the proper plaintiffs to bring a RICO claim based on the alleged fraud against the government.

The court distinguished cases in which fraudulent statements to the government were used as a tool to directly harm the plaintiffs. It also relied on decisions holding that RICO does not provide a remedy to plaintiffs whose injuries are less direct when another party is better positioned to recover for the alleged fraud.

Because the court found that Mason had not pleaded the required causation for a RICO claim under § 1962(c), it did not decide whether he adequately pleaded the other RICO elements, including an enterprise or the heightened fraud-pleading requirements under Rule 9(b).

RICO Conspiracy Claim

The court held that Mason’s RICO conspiracy claim under § 1962(d) also failed because he had not adequately pleaded an underlying RICO violation.

Disposition

The court granted defendants’ motion to dismiss Mason’s RICO claims. The court also granted Mason leave to amend the complaint concerning those claims because it could not say with certainty that amendment would be futile. Mason was ordered to file an amended complaint by January 24, 2020. The opinion did not state a disposition for the separate state-law claims in these motions.