## Facts

- New York City imposed a tax on the possession of cigarettes within the City.
- Hemi Group, an out-of-state internet cigarette seller, sold cigarettes directly to New York City residents.
- City and state law did not require Hemi to collect or remit the City’s cigarette tax; the City sought to recover taxes from purchasers.
- The federal Jenkins Act required out-of-state cigarette sellers to report customer shipment information to the recipient State; New York State agreed to forward that information to New York City to aid tax enforcement.
- The City alleged Hemi failed to file Jenkins Act reports and characterized that failure as mail and wire fraud predicate acts under RICO.
- The City claimed it lost substantial tax revenue because, without customer information, it could not identify and pursue purchasers who failed to pay the City’s tax.
- The district court dismissed for failure to plead RICO causation; the Second Circuit reversed; the Supreme Court reversed the Second Circuit.

## Issues

1. Whether the City plausibly alleged injury to its business or property “by reason of” a RICO violation when the alleged tax loss depended on third-party purchasers’ failure to pay taxes.
2. Whether RICO proximate causation is satisfied by foreseeability and alleged intent, or instead requires a direct relation between the predicate acts and the plaintiff’s injury.

## Decision

- The Supreme Court reversed the Second Circuit and held the City failed to satisfy RICO’s “by reason of” causation requirement under 18 U.S.C. § 1964(c).
- The Court held the causal chain between the alleged predicate acts (nonreporting framed as mail/wire fraud) and the City’s lost tax revenue was too attenuated because it depended on independent actions of third parties (purchasers’ nonpayment) and intervening steps (information flow and enforcement decisions).
- The Court rejected the City’s attempt to establish proximate cause primarily through foreseeability or alleged purpose, and required a direct relation between the RICO violation and the asserted injury.
- The case was remanded for further proceedings consistent with the Court’s ruling.

## Legal Principles

- Civil RICO requires both but-for causation and proximate causation; proximate cause demands a direct relation between the injury asserted and the injurious conduct alleged.
- An injury is not proximately caused under RICO when it is contingent on separate actions by separate parties and involves a multi-step causal chain with intervening decisions.
- Foreseeability or alleged intent alone does not establish RICO proximate causation; the inquiry focuses on whether the conduct constituting the RICO violation directly caused the plaintiff’s harm.
- The availability of more immediate victims who can sue supports denying recovery to more remote plaintiffs under § 1964(c).

## Conclusion

The Court held that New York City could not recover under civil RICO for lost cigarette tax revenue because the asserted harm flowed indirectly from alleged reporting fraud and depended on purchasers’ independent nonpayment, failing RICO’s direct-relation proximate cause requirement.


Hemi Grp., LLC v. City of New York, 559 U.S. 1 (2010)