When Connie Mathews allegedly failed to pay her Portable on Demand Storage (PODS) bill, the company auctioned off the contents of her container and used the proceeds to pay the bill. Her belongings were reportedly worth over $300,000. PODS received approximately one percent of that amount.
Mathews was peeved, so she did what any disgruntled storage customer would do: She slapped PODS with a $2 million RICO claim. Wednesday, the Sixth Circuit explained that a RICO suit isn't the best revenge.
The Racketeer Influenced and Corrupt Organizations Act (RICO) was Congress' attempt to combat organized crime. Before RICO, prosecutors could nab the workers within criminal organizations, but they had trouble prosecuting the ringleaders. Under RICO, a prosecutor doesn't have to prove that the mastermind committed the crime: Instead, the prosecutor has to show that the defendant owns or manages an organization, and that organization regularly performs one or more specific illegal activity.
So how would RICO apply to the purveyors of the PODS? According to Mathews, the defendants were involved in the ownership and administration of PODS Enterprises, Inc., and they engaged in mail and wire fraud when they communicated with her by mail and telephone without informing her of the date, time, and location of the auction of her property.
Both PODS and the district court agreed the Mathews' claim was ripe for a 12(b)(6) motion. The case was dismissed.
Not one to be easily dissuaded by a lack of plausible facts, Mathews moved on to the Sixth Circuit Court of Appeals. This week, the court concluded that her claim didn't meet the FRCP 9(b) requirements for a fraud pleading because she failed to allege the existence of a fraudulent scheme and the fraudulent intent of the participants in the scheme.
The panel wrote:
Defendants auctioned the stored property in order to recover the unpaid storage fees, and remitted the balance to Mathews. There was no plausible allegation that defendants acted with intent to defraud ... Even accepting the complaint's allegation that Mathews was never informed of the location of the auction, the complaint failed to set forth a plausible claim of mail or wire fraud to support the claim of a RICO violation.
Consumer protection laws within your state might offer a remedy against a storage company that doesn't give your client all the auction details before selling her stuff. A RICO claim, on the other hand, will leave her even more empty-handed than empty PODS.
- Connie Mathews v. PODS Enterprises, Inc (Sixth Circuit Court of Appeals)
- JPMorgan Chase Not Liable Under RICO, 2nd Circuit Says (FindLaw's Second Circuit Blog)
- RICO Pays a Visit to the Supreme Court (FindLaw's Courtside)