JOY RYDER and RHONDA LEE v. David Hyles , Hyles -Anderson College, Inc .

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 21-2590
JOY R YDER and R HONDA LEE,
Plaintiffs-Appellants,
v.
DAVID HYLES , HYLES -A NDERSON C OLLEGE, I NC ., and F IRST
BAPTIST C HURCH OF HAMMOND I NDIANA, I NC .,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:20-cv-01153 — Charles R. Norgle, Judge.
____________________
A RGUED F EBRUARY 16, 2022 — DECIDED M ARCH 4, 2022
____________________
Before R IPPLE, S CUDDER , and K IRSCH , Circuit Judges.
SCUDDER , Circuit Judge. This case arises out of horrific alle-
gations of sexual abuse and assault at the First Baptist Church
of Hammond, Indiana and its affiliated school, Hyles-Ander-
son College, in the late 1970s. Plaintiffs Joy Ryder and Rhonda
Lee both allege that David Hyles, a leader of the Church and
College, sexually assaulted them over several years, with
Hyles, the Church, and the College then conspiring to cover

-- 1 of 7 --

2 No. 21-2590
up the abuse. Decades later, in 2020, the plaintiffs sought to
recover for their alleged injuries by bringing a civil claim un-
der the federal Racketeer Influenced and Corrupt Organiza-
tions Act. The district court dismissed the complaint for a
pleading failure—the plaintiffs had not alleged the injury to
“business or property” required for RICO’s civil cause of ac-
tion. We affirm.
I
A
As the son of the Church’s founder, Hyles worked for, and
held various leadership positions in, the Church and College.
Joy Ryder and Rhonda Lee were teenagers and members of
the Church in the 1970s. Both allege that Hyles repeatedly sex-
ually assaulted them during this time. Throughout the period
of abuse, Ryder alleges that she paid tithes and offerings to
the Church, as well as fees to participate in a music group and
other youth activities. For her part, Lee did not allege that she
paid money to the Church or College during this period.
The complaint further alleges that the Church and College
knew of the wrongdoing but that both institutions and
Hyles—collectively, “the Enterprise”—“treated rape, sexual
abuse, and sexual assault as an internal matter and ‘dealt’
with these serious allegations internally,” going to “great
lengths” to prevent law enforcement from learning of the
criminal misconduct. The cover-up, the complaint continues,
included the Church and College allegedly undertaking a
sham investigation into other allegations of sexual assault at
both institutions in the 2010s.

-- 2 of 7 --

No. 21-2590 3
B
In 2020 Ryder and Lee invoked RICO’s civil cause of ac-
tion, see 18 U.S.C. §§ 1962, 1964(c), and sued Hyles, the
Church, and the College, contending that the Enterprise’s al-
leged misconduct injured their business or property.
The defendants moved to dismiss the operative complaint
(the Second Amended Complaint) pursuant to Federal Rule
of Civil Procedure 12(b)(1), arguing that the district court
lacked subject matter jurisdiction because Ryder and Lee had
not alleged injuries to their business or property. No doubt
the defendants proceeded this way because of what we said
in Evans v. City of Chicago: the “business or property” require-
ment in § 1964(c) is “a jurisdictional requirement” akin to “a
standing requirement—rather than an element of the cause of
action—which must be satisfied in order to prevail on a RICO
claim.” 434 F.3d 916, 924 (7th Cir. 2006) (citations omitted).
But Evans came before a long line of recent Supreme Court
decisions clarifying that the word “jurisdiction” (and related
considerations of Article III subject matter jurisdiction) should
be used with more precision. See Reed Elsevier, Inc. v. Much-
nick, 559 U.S. 154, 161–62 (2010) (noting that while “[c]ourts—
including this Court—have sometimes mischaracterized . . .
elements of a cause of action as jurisdictional limitations,”
“[o]ur recent cases evince a marked desire to curtail such
drive-by jurisdictional rulings”) (internal quotation and cita-
tions omitted); see also Arbaugh v. Y&H Corp., 546 U.S. 500,
511–12 (2006) (collecting examples). In this light, it is clear that
the business or property requirement is a non-jurisdictional
element of the cause of action Congress supplied in § 1964(c).
A plaintiff’s failure to plead this element therefore requires

-- 3 of 7 --

4 No. 21-2590
dismissal under Rule 12(b)(6), not 12(b)(1). We modify the dis-
trict court’s judgment accordingly.
In any event, the district court dismissed the plaintiffs’
complaint, concluding that they had not alleged injuries to
their business or property, as required by § 1964(c). The dis-
trict court underscored that Ryder and Lee’s primary injuries
were personal and any “pecuniary losses flowing from per-
sonal injuries are insufficient to confer standing for a RICO
claim.” From there the district court rejected Ryder and Lee’s
contention that they satisfied RICO’s injury-to-business or
property requirement by alleging that the Church used their
fees and donations to fund the Enterprise’s sham investiga-
tions—which, as both plaintiffs alleged, “diminished the
value of the education and activities.” The court explained
that, because Ryder and Lee had “characterize[d] these con-
tributions . . . as donations,” these payments could not “give
rise to any legal interest in exchange for them.”
This appeal followed.
II
The RICO statute makes it “unlawful for any person em-
ployed by or associated with any enterprise . . . [with an inter-
state or foreign commerce nexus] to conduct or participate,
directly or indirectly, in the conduct of such enterprise’s af-
fairs through a pattern of racketeering activity.” 18 U.S.C.
§ 1962(c). And it creates a civil cause of action, permitting
“[a]ny person injured in his business or property by reason of a
violation of section 1962” to recover treble damages, costs,
and reasonable attorney’s fees. Id. § 1964(c) (emphasis added).
The requirement that civil RICO plaintiffs allege an injury
to “business or property” serves to “preclude recovery for

-- 4 of 7 --

No. 21-2590 5
personal injuries and the pecuniary losses incurred there-
from.” Doe v. Roe, 958 F.2d 763, 767 (7th Cir. 1992); see also
Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979) (“The phrase
‘business or property’ . . . would, for example, exclude per-
sonal injuries suffered.”). “Most personal injuries,” we have
recognized, “will entail some pecuniary consequences,” but
that does not transform them all into “business or property”
injuries. Doe, 958 F.2d at 770. Instead, when the alleged inju-
ries “are plainly derivative[]” of personal injuries, they “re-
flect personal injuries which are not compensable under
RICO.” Id.; see also Evans, 434 F.3d at 927 (“Evans’ claim of
loss of employment income is nothing more than an indirect,
or secondary effect, of the personal injuries that he allegedly
suffered . . . and therefore such a claim does not constitute a
cognizable injury to ‘business or property’ within the mean-
ing of § 1964(c).”).
Here, the complaint focuses entirely on allegations of per-
sonal injury—horrific allegations by any measure. The nature
of the alleged personal injuries does not, however, transform
them into injuries to any business or property. See Evans, 434
F.3d at 927; Doe, 958 F.2d at 770.
Ryder and Lee disagree, claiming they have suffered two
injuries to identifiable property interests under Illinois law.
But, even assuming that Ryder and Lee possessed these
claimed property interests, their claims, as they appear in
their complaint, are too attenuated to avoid dismissal. First,
Ryder and Lee contend that they suffered a “deprivation from
the bargained-for access to and enjoyment of the activities
provided by the Church, School, and College that they paid
for and had a legitimate expectation to receive.” But their
complaint never explains why Hyles’s alleged misconduct

-- 5 of 7 --

6 No. 21-2590
directly caused a business or property injury. Rather, the com-
plaint alleges that Ryder and Lee suffered personal injuries
during the exercise of a property right (in particular, at a time
of expending money to participate in Church-related activi-
ties) that had an “indirect, or secondary effect” on the value
of the property right. Evans, 434 F.3d at 927. This is insufficient
to satisfy the business or property element of a civil RICO
claim. Accepting the contentions as true does nothing to
change the alleged injuries at the center of the RICO claim—
the sexual abuse inflicted by Hyles.
Second, Ryder and Lee contend that the Enterprise misap-
propriated their funds by using them to fund a sham investi-
gation in the 2010s. But nowhere does their complaint de-
scribe how tithes or tuition paid in the 1970s could plausibly
have been used to fund a phony investigation decades later.
So here Ryder and Lee’s allegations are too “speculative and
amorphous” to permit their RICO claim to proceed. Id. at 932.
Because the district court dismissed the complaint under
Rule 12(b)(1), the dismissal necessarily was without preju-
dice. See Remijas v. Neiman Marcus Grp., LLC, 794 F.3d 688, 690
(7th Cir. 2015) (citing Hernandez v. Conriv Realty Assocs., 182
F.3d 121, 122 (2d Cir. 1999)). A dismissal under Rule 12(b)(6),
in contrast, “operates as an adjudication on the merits” and is
with prejudice unless otherwise specified. Fed. R. Civ. P.
41(b); see also Remijas, 182 F.3d at 697. In the ordinary course,
“a plaintiff whose original complaint has been dismissed un-
der Rule 12(b)(6) should be given at least one opportunity to
try to amend her complaint before the entire action is dis-
missed.” Runnion ex rel. Runnion v. Girl Scouts of Greater Chi-
cago & Nw. Indiana, 786 F.3d 510, 519 (7th Cir. 2015); see also

-- 6 of 7 --

No. 21-2590 7
Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave [to
amend] when justice so requires.”).
It is difficult to see how Ryder and Lee could amend their
complaint for a third time to advance plausible allegations
they suffered the injury to business or property required by
§ 1964(c). See Loja v. Main St. Acquisition Corp., 906 F.3d 680,
684–85 (7th Cir. 2018) (recognizing that district courts have
broad discretion to deny leave to amend when doing so
would be futile). And this observation most likely explains
why the district court ordered the case closed alongside its
dismissal order.
* * *
What is alleged here is tragic beyond words. But we are
constrained by the limitations Congress established in
§ 1964(c). Because Ryder and Lee have not plausibly alleged
any injury to business or property within the meaning of the
statute, we are left to AFFIRM AS MODIFIED.

-- 7 of 7 --