THE VANGUARD GROUP, INC., GEORGE U. SAUTER, DUANE F. KELLY, JOHN J. BRENNAN, CHARLES D. ELLIS, RAJIV L. GUPTA, AMY GUTMANN, JOANN HEFFERNAN HEISEN, ANDRE F. PEROLD, ALFRED M. RANKIN JR., J. LAWRENCE WILSON, ACADIAN ASSET MANAGEMENT, LLC, RONALD D. FRASHURE, JOHN R. CHISHOLM, BRIAN K. WOLAHAN, MARATHON ASSET MANAGEMENT, LLP and NEIL M. OSTRER, Defendants-Appellees, VANGUARD INTERNATIONAL EQUITY INDEX FUNDS, D/B/A VANGUARD EUROPEAN STOCK INDEX FUND, VANGUARD HORIZON FUNDS, D/B/A VANGUARD GLOBAL EQUITY FUND, Nominal Defendants-Appellees, ALLIANCE BERNSTEIN LP, HENRY S. D’AURIA, SHARON E. FAY, KEVIN F. SIMMS, WILLIAM J. ARAH and JEREMY H. HOSKING, Defendants.
No. 09-1445-cv.United States Court of Appeals, Second Circuit.
November 24, 2009.
Appeal from the United States District Court for the Southern District of New York (Denise L. Cote, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED
that the judgment of the district court is AFFIRMED.
Appearing for Appellants: THOMAS I. SHERIDAN, III (Andrea Bierstein, onthe brief), Hanly Conroy Bierstein Sheridan Fisher Hayes LLP, New York, New York.
Appearing for Appellees: HARRY A. OLIVAR, JR. (A. William Urquhart and Jasmine M. Starr, Quinn Emanuel Urquhart Oliver Hedges, LLP, Los Angeles, California; David Braff, Penny Shane, and Amanda F. Davidoff, Sullivan Cromwell LLP, New York, New York; Kenneth S. Leonetti, Brandon F. White, and Kirk G. Hanson, Foley Hoag LLP, Boston, Massachusetts; Robert M. Dato, Michael Cereseto, and L. Richard Walton, Buchalter Nemer, PC, Los Angeles, California, on the brief), Quinn Emanuel Urquhart Oliver Hedges, LLP, Los Angeles, California.
PRESENT: HON. RALPH K. WINTER, HON. ROSEMARY S. POOLER, Circuit Judges, HON. JED S. RAKOFF, District Judge.[*]
Plaintiffs-appellants appeal a judgment entered on April 6, 2009 in the United States District Court for the Southern District of New York (Cote, J.) dismissing with prejudice plaintiffs’ claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 etseq. (“RICO”). Plaintiffs were shareholders in certain of defendants’ mutual funds that had invested in online gambling companies. They brought this civil RICO action after the shares of these online gambling companies declined in value following a government crackdown on illegal offshore gambling. We assume general familiarity with the underlying facts, procedural history, and issues on appeal.
We review de novo the district court’s grant of a motion to dismiss, taking all reasonable inferences in plaintiffs’ favor. City of N.Y. v.Smokes-Spirits.com, Inc., 541 F.3d 425, 439 (2d Cir. 2008).
To state a civil RICO claim, plaintiffs must show that they were injured “by reason of” the alleged racketeering activity, 18 U.S.C. § 1964(c), that is, that the defendant’s RICO violation proximately caused plaintiffs’ injuries. See Anza v. Ideal Steel SupplyCorp., 547 U.S. 451, 457 (2006); Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 267-68 (1992); see also Smokes-Spirits, 541 F.3d at 440-41;Lerner v. Fleet Bank, N.A., 318 F.3d 113, 121-22 (2d Cir. 2003). In the RICO context, proximate causation means, in turn, that “the alleged violation led directly to the plaintiff’s injuries.” Anza, 547 U.S. at 461. Here, however, the complaint alleges that the decline in the funds’ online gambling holdings was not the direct result of the RICO violation — the owning and/or financing of illegal gambling — but rather was the result of the subsequent
“government crackdown” on the illegal gambling. Although plaintiffs contend that the law enforcement crackdown was a foreseeable risk of defendants’ activities (rather than a supervening cause),  we have already held that proximate causation is lacking under RICO when the harm results from the exposure or disclosure of the RICO predicate activity.In re Am. Express Co. S’holder Litig., 39 F.3d 395, 400 (2d Cir. 1994).
Plaintiffs also argue that the “underlying premises” of the proximate cause requirement set forth by the Supreme Court in Holmes v. SecuritiesInvestor Protection Corp., 503 U.S. at 269-70, support a finding of proximate cause here. It is hardly clear that this is so; but even assuming arguendo that these policy considerations cut in plaintiffs’ favor, they cannot remedy
the basic defects in causation discussed above, nor provide a basis for overruling our clear prior precedents.
For the foregoing reasons, the judgment of the district court is herebyAFFIRMED.