Young v. Schultz

Background

Jacalyn A. Young and Diane Lynn are members of The Woodlands Owners’ Association in Santa Rosa, California. Schultz is also a member. The plaintiffs alleged that Schultz, or his wife, requested financial information about the association and that Schultz later demanded “things of value,” including Young’s resignation from the association’s board. They alleged that Schultz threatened to publish false information about them and their church, including accusations of possible tax fraud and money laundering.

The plaintiffs initially sued under federal criminal statutes for blackmail, mailing threatening communications, and stalking. The court dismissed those claims because the statutes did not provide the plaintiffs with civil causes of action and allowed them to amend. The plaintiffs then filed an amended complaint alleging a civil claim under the Racketeer Influenced and Corrupt Organizations Act, commonly called RICO.

Rule 12(b)(6) Standard

The court considered whether the amended complaint plausibly stated a claim for relief, accepting well-supported factual allegations as true and viewing them in the plaintiffs’ favor. A claim is not sufficient if it relies only on conclusory statements without supporting facts.

Discussion

A civil RICO claim requires allegations of conduct involving an enterprise, a pattern of racketeering activity, and injury to the plaintiff’s business or property caused by the alleged RICO violation.

The court held that the plaintiffs did not allege a recoverable business or property injury. Their allegations of emotional distress, including insomnia, high blood pressure, worry, anxiety, and fatigue, did not qualify under RICO. The court also concluded that the alleged reputational harm was not a business or property injury under the statute. The complaint did not identify another qualifying injury.

The court also found that the alleged group did not plausibly constitute a RICO enterprise. Although the plaintiffs referred to Schultz, his wife, and “trusted cohorts,” the complaint did not provide enough facts showing an organized, continuing group. The allegations described possible collective activity during one week in April 2021 and did not show that Schultz worked with anyone before or after that period.

The court further held that the plaintiffs had not adequately alleged racketeering activity. The plaintiffs relied in part on 18 U.S.C. § 873, but that criminal statute is not among RICO’s listed predicate acts. Although extortion can qualify as a predicate act, extortion requires obtaining or attempting to obtain property. The court found that the plaintiffs did not identify property Schultz appropriated or attempted to appropriate. The alleged demands, including Young’s resignation from the board and avoiding publicity or government investigations, were more accurately characterized as coercion, which the court said did not qualify as the required predicate act on these allegations. Because the complaint did not adequately allege racketeering activity, it also did not allege a pattern of racketeering activity.

Disposition

The court granted Schultz’s motion to dismiss under Rule 12(b)(6). It also granted the plaintiffs leave to amend, directing that any second amended complaint be filed within 30 days of the order. The opinion does not state that the dismissal was with or without prejudice.