J. Bertolet, Inc. v. Robert Bosch, LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: January 26, 2021
• Docket: 20-15034
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION JAN 26 2021 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: VOLKSWAGEN “CLEAN No. 20-15034 DIESEL” MARKETING, SALES PRACTICES, AND PRODUCTS D.C. Nos. 3:16-cv-02086-CRB LIABILITY LITIGATION, 3:15-md-02672-CRB ______________________________

J. BERTOLET, INC., DBA J. Bertolet MEMORANDUM* Volkswagen, a Pennsylvania corporation; DIRECT B, LLC, DBA Brandon Volkswagen, a Florida limited liability company; SAI AUTO GROUP, LLC, DBA Bozzani Volkswagen, a California limited liability company, individually, on behalf of themselves and all similarly situated persons and entities,

Plaintiffs-Appellants,

v.

ROBERT BOSCH, LLC, a Michigan limited liability company; ROBERT BOSCH GMBH, a German corporation,

Defendants-Appellees.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Appeal from the United States District Court for the Northern District of California Charles R. Breyer, District Judge, Presiding

Argued and Submitted January 15, 2021 San Francisco, California

Before: SCHROEDER, BYBEE, and R. NELSON, Circuit Judges.

Plaintiffs/Appellants J. Bertolet, Inc. d/b/a J. Bertolet Volkswagen (Bertolet

VW), Direct B, LLC d/b/a Brandon Volkswagen (Brandon VW), and SAI Auto

Group, LLC d/b/a Bozzani Volkswagen (Bozzani VW) (collectively, Plaintiffs)

are three Volkswagen-branded franchise dealers who sold turbocharged direct

injection diesel engine vehicles equipped with defeat devices (TDIs) between 2009

and 2015. According to Plaintiffs, Defendants/Appellees, Robert Bosch GmbH

and Robert Bosch LLC (collectively, Bosch) (1) knowingly conspired with

Volkswagen to develop, implement, and promote defeat devices—software that

allowed TDI vehicles to appear compliant during emissions testing—thereby

participating in a racketeering enterprise in violation of the Racketeer Influenced

and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c); and (2) also

conspired to violate that statute, id. § 1962(d).

The district court granted summary judgment in favor of Bosch because

Plaintiffs failed to establish that their claimed injuries (future lost profits from the

2 cessation of the TDI line and Volkswagen’s buyback program following the public

revelation of the defeat devices) were caused “by reason of” the RICO violations.

Plaintiffs timely appealed. Because the parties are familiar with the facts, we will

not recite them here. We have jurisdiction under 28 U.S.C. § 1291. We affirm.

We review the district court’s grant of summary judgment de novo and “may

affirm on any basis supported by the record.” Gordon v. Virtumundo, Inc., 575

F.3d 1040, 1047 (9th Cir. 2009) (citation omitted). Our review is “governed by the

same standard used by the trial court under Federal Rule of Civil Procedure 56(c).”

Adcock v. Chrysler Corp., 166 F.3d 1290, 1292 (9th Cir. 1999).

RICO provides a civil cause of action to “[a]ny person injured in his

business or property by reason of a violation of section 1962 of this chapter . . . .”

18 U.S.C. § 1964(c). Standing for civil RICO claims thus requires: (1) an alleged

harm that qualifies as an injury to the plaintiff’s business or property; and (2) that

the harm was “by reason of” the RICO violation, which requires the plaintiff to

demonstrate proximate causation. See Canyon Cnty. v. Syngenta Seeds, Inc., 519

F.3d 969, 972 (9th Cir. 2008) (citing Holmes v. Secs. Inv. Protection Corp., 503

U.S. 258, 268 (1992)). The parties dispute both elements: (1) whether Plaintiffs’

claimed damages from the discontinuation of the TDI line and the buyback

constitute an injury to their “business or property” within the meaning of RICO;

3 and (2) whether Bosch’s alleged participation in the defeat device scheme

proximately caused Plaintiffs’ injuries. Because Plaintiffs’ claimed damages were

not proximately caused by the alleged racketeering activity, we decline to address

whether Plaintiffs have suffered an injury to their business or property within the

meaning of RICO.

“The Supreme Court has interpreted the phrase ‘by reason of’ in 18 U.S.C.

§ 1964(c) to require, as elements for a civil RICO recovery, both proximate and

but-for causation.” Painters and Allied Trades Dist. Council 82 Health Care Fund

v. Takeda Pharms. Co. Ltd., 943 F.3d 1243, 1248 (9th Cir. 2019) (citing Holmes,

503 U.S. at 268). Proximate cause for RICO purposes requires “some direct

relation between the injury asserted and the injurious conduct alleged.” Holmes,

503 U.S. at 268. Here, Plaintiffs argue that “it was a foreseeable and natural

consequence” of Bosch’s participation in Volkswagen’s fraudulent scheme that

“once their fraud was exposed and TDIs were entirely withdrawn from the market,

Plaintiffs [would lose] the opportunity to sell TDIs and also suffered injuries due to

VW’s buyback of TDIs.” But the mere possibility that the initial fraud would be

discovered and ultimately cause the cessation of the TDI line and buyback program

is not sufficient to establish proximate cause. See Hemi Grp., LLC v. City of New

York, 559 U.S. 1, 12 (2010).

4 Nor is Plaintiffs’ reliance on Bridge v. Phoenix Bond & Indem. Co., 553

U.S. 639 (2009) persuasive. There, property lien auction bidders allegedly made

fraudulent representations to the county to secure a disproportionate amount of

liens at a county tax-lien auction. Id. at 643–44. Although the fraud was

perpetrated on the county, the Supreme Court determined that the losing bidders’

alleged injury––the loss of valuable liens––was the “direct result of petitioners’

fraud.” Id. at 658. But unlike the “zero-sum nature of the auction” in Bridge,

Plaintiffs’ theory of proximate causation necessarily encompasses an intervening

step: the discovery of the fraud. Hemi Grp., 559 U.S. at 14–15 (discussing Bridge,

553 U.S. at 657–59). That is, Plaintiffs’ damages were caused by reason of the

fraud’s discovery, not the fraud itself. See Canyon Cnty., 519 F.3d at 981 (“Where

the violation is not itself the immediate cause of the plaintiff’s injury, proximate

cause may be lacking.”). Allowing Plaintiffs to recover for all possible

consequences of the alleged RICO violations––including fallout from the

discovery of RICO violations—runs counter to the notion of proximate cause,

which reflects that “there is a point beyond which the wrongdoer should not be

held liable.” Holmes, 503 U.S. at 266 n.10 (internal quotation marks and citation

omitted).

5 We therefore hold that the district court correctly determined that Plaintiffs’

claimed injuries were not proximately caused by the alleged RICO violations. The

district court also correctly granted summary judgment on the state law claims for

lack of proximate cause.

AFFIRMED.