## Facts

- Commercial Cleaning Services, L.L.C. operated a small janitorial business in the Hartford, Connecticut area.
- Colin Service Systems, Inc. was a larger office-cleaning company competing for the same cleaning contracts.
- Commercial alleged Colin engaged in a longstanding scheme of knowingly hiring at least ten unauthorized workers, paying substandard wages, and avoiding payroll taxes and workers’ compensation premiums.
- The alleged hiring practices violated 8 U.S.C. § 1324(a) and were asserted as RICO predicate acts under 18 U.S.C. § 1961(1)(F).
- Commercial alleged Colin’s reduced labor costs allowed it to submit artificially low bids, causing Commercial (and similarly situated competitors) to lose existing and prospective contracts and customers.
- Commercial brought a putative class action seeking treble damages under civil RICO, 18 U.S.C. § 1964(c).
- The district court dismissed under Rule 12(b)(6) for lack of RICO standing (no proximate cause) and for alleged noncompliance with a local civil RICO standing order requiring a detailed RICO case statement, and it denied leave to amend.

## Issues

1. Whether a competitor’s loss of contracts and customers allegedly caused by a rival’s illegal hiring scheme is sufficiently direct to satisfy civil RICO’s proximate-cause requirement for standing under 18 U.S.C. § 1964(c).
2. Whether dismissal without leave to amend was proper based on alleged deficiencies in the plaintiff’s required civil RICO case statement under a local standing order.

## Decision

- The Second Circuit vacated the dismissal and remanded.
- The court held the complaint plausibly alleged a direct relationship between the predicate acts (illegal hiring as a cost-cutting scheme) and the claimed injury (lost contracts/customers due to underbidding), satisfying RICO proximate cause at the pleading stage.
- The court held that alleged deficiencies in the RICO case statement did not justify terminating the action without allowing amendment or supplementation.

## Legal Principles

- Civil RICO standing requires pleading: (1) a violation of 18 U.S.C. § 1962, (2) injury to business or property, and (3) causation of that injury by the RICO violation, including proximate cause.
- RICO proximate cause turns on the directness of the injury; competitor losses may be direct where the alleged racketeering conduct is designed to reduce costs and enable underbidding that displaces competitors from contracts.
- Administrative concerns relevant to proximate cause include risks of multiple recoveries and speculative damages; competitor bid-related losses may be sufficiently concrete to proceed.
- Local civil RICO case-statement requirements may be enforced, but dismissal without leave to amend is generally unwarranted absent egregious noncompliance, especially where the complaint and statement together substantially inform the claims.

## Conclusion

The Second Circuit reinstated the civil RICO action, holding that a competitor plausibly alleged proximate cause where illegal hiring allegedly enabled underbidding that directly displaced competitors’ contracts, and that procedural shortcomings in a RICO case statement did not warrant dismissal without an opportunity to amend.


Commercial Cleaning Servs., L.L.C. v. Colin Serv. Sys., Inc., 271 F.3d 374 (2d Cir. 2001)