The opinion of the court was delivered by: THOMAS N. O'NEILL JR.
Currently before the Court is defendant's motion pursuant to Fed.R.Civ.P. Rule 12(b)(6) to dismiss plaintiff's cause of action under the Racketeer Influenced and Corrupt Organizations Act, 18, U.S.C. § 1961 et. seq. ("RICO"). Defendant moves that Counts III and IV of plaintiff's complaint be dismissed because (1) a Civil RICO claim abates upon the death of a party and (2) plaintiff lacks standing to bring a Civil RICO action because it cannot establish that the alleged RICO activity was the proximate cause of its injury.
In reviewing a motion made pursuant to Fed.R.Civ.P. Rule 12(b)(6) to dismiss a plaintiff's cause of action for failure to state a cognizable claim, the court must accept as true all of plaintiff's well-pleaded factual allegations as well as all reasonable inferences favorable to the plaintiff that may be drawn from those factual allegations. Elliott v. State Farm Mutual Automobile Insurance Co., 786 F. Supp. 487, 489 (E.D.Pa. 1992). The Court should not dismiss a case for failure to state a claim unless it clearly appears that no relief can be granted under any set of facts that could be proved consistent with the plaintiff's allegations. Id.
It is alleged that pursuant to this scheme M. Goodman created trusts which would, upon his death, divide trust assets among his customers in proportion to the size of their trading account assets at the time of his death. M. Goodman is alleged to have funded the trusts through the purchase of approximately 25 life insurance policies from 18 different companies including the plaintiff. These purchases constituted or affected interstate commerce. Plaintiff alleges that it and the other insurance companies issued these policies on the basis of material misrepresentations and omissions contained in M. Goodman's insurance policy applications.
Plaintiff asserts that M. Goodman's alleged acts constituted a pattern of racketeering activity in violation of RICO, that his trusts and trading accounts constituted an enterprise and that M. Goodman and his estate are persons within the meaning of the Civil RICO statute. In Count III of its complaint, plaintiff alleges that M. Goodman violated 18 U.S.C. § 1962 (a) and (d).
In Count IV of its complaint plaintiff alleges that M. Goodman violated 18 U.S.C. § 1962 (c) and (d).
On the basis of M. Goodman's alleged RICO activities, plaintiff seeks to recover threefold damages from M. Goodman's estate pursuant to 18 U.S.C. § 1964(c).
Although the Court of Appeals has not directly addressed the present question, defendant asserts that controlling precedent of this circuit mandates that this Court hold that Civil RICO claims do not survive the death of the defendant. I agree.
When a federal statute is silent upon the issue of survival, federal common law determines whether the claim survives or abates upon the death of one of the parties. Carlson v. Green, 446 U.S. 14, 23, 64 L. Ed. 2d 15, 100 S. Ct. 1468 (1980). Courts that have considered the question of claim survival in the context of Civil RICO have adopted a common law rule that remedial claims survive while punitive claims abate upon the death of the defendant.
See, eg., County of Oakland by Kuhn v. City of Detroit, 784 F. Supp. 1275, 1284-85 (E.D.Mich. 1992)(holding that RICO civil penalties are primarily remedial); State Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 681 (N.D.Ind. 1982)(holding that RICO civil penalties are primarily remedial), overruled on other grounds, Ashland Oil, Inc. v. Arnett, 656 F. Supp. 950, 953 (N.D.Ind. 1987)(following Tellis v. United States Fidelity and Guarantee Co., 805 F.2d 741, 746 (7th Cir. 1986) (holding that Civil RICO claims are penal in nature in determining the appropriate statute of limitations to apply to the statute) vacated in part 483 U.S. 1015, 107 S. Ct. 3255, 97 L. Ed. 2d 755 (1987)).
The Court of Appeals for the Third Circuit examined the remedial/punitive nature of Civil RICO to determine whether such claims could be maintained against a municipal corporation in Genty v. Resolution Trust Corp., 937 F.2d 899 (3rd Cir. 1991). After determining that Congress' primary intent in enacting Civil RICO was to punish wrongs against ...