ANZA et al. v. IDEAL STEEL SUPPLY CORP.

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451 OCTOBER TERM, 2005
Syllabus
ANZA et al. v. IDEAL STEEL SUPPLY CORP.
certiorari to the united states court of appeals for
the second circuit
No. 04–433. Argued March 27, 2006—Decided June 5, 2006
The Racketeer Influenced and Corrupt Organizations Act (RICO) prohib
its certain conduct involving a “pattern of racketeering activity,” 18
U. S. C. § 1962, and makes a private right of action available to “[a]ny
person injured in his business or property by reason of a violation”
of RICO’s substantive restrictions, § 1964(c), provided that the alleged
violation was the proximate cause of the injury, Holmes v. Securities
Investor Protection Corporation, 503 U. S. 258, 268. Respondent Ideal
Steel Supply Corporation (Ideal) has stores in Queens and the Bronx.
Petitioner National Steel Supply, Inc. (National), owned by petitioners
Joseph and Vincent Anza, has stores in the same locations and is Ideal’s
principal competitor. Ideal filed suit in the District Court, claiming
that National failed to charge New York’s sales tax to cash-paying cus
tomers, allowing it to reduce its prices without affecting its profit mar
gin; and that it submitted fraudulent state tax returns to conceal the
conduct, which involved committing mail and wire fraud, both forms
of “racketeering activity” under RICO. Ideal alleged that the Anzas
violated § 1962(c), which forbids conducting or participating in the con
duct of an enterprise’s affairs through a pattern of racketeering activity.
It also claimed that all the petitioners violated § 1962(a)—which makes
it unlawful for a person “to use or invest” income derived from a pattern
of racketeering activity in an enterprise engaged in or affecting inter
state or foreign commerce—when they used funds generated by the
fraudulent tax scheme to open National’s Bronx location, causing Ideal
to lose business and market share. The District Court granted peti
tioners’ motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), concluding that Ideal had not shown reliance on petitioners’
misrepresentations, as required in RICO mail and wire fraud claims.
Vacating, the Second Circuit held, with regard to the § 1962(c) claim,
that a complaint alleging a pattern of racketeering activity designed to
give a defendant a competitive advantage adequately pleaded proximate
cause even where the scheme depended on fraudulent communications
made to a third party; and held that Ideal adequately pleaded its
§ 1962(a) claim by alleging injury resulting from petitioners’ use and
investment of racketeering proceeds.

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452 ANZA v. IDEAL STEEL SUPPLY CORP.
Syllabus
Held:
1. Ideal cannot maintain its § 1962(c) claim. Under Holmes, proxi
mate cause for § 1964(c) purposes requires “some direct relation between
the injury asserted and the injurious conduct alleged.” 503 U. S., at
268. The direct victim of the alleged RICO violation is the State of
New York, not Ideal. Ideal’s claim is too attenuated to satisfy Holmes’
requirement of directness. This result is confirmed by the directness
requirement’s underlying premises, one of which is the difficulty that
can arise when a court attempts to ascertain the damages caused by
some remote action. Ideal claims lost sales because of National’s de
creased prices, but National could have lowered prices for reasons unre
lated to the asserted tax fraud, and Ideal’s lost sales could have resulted
from other factors as well. The attenuated connection between Ideal’s
injury and the Anzas’ injurious conduct thus implicates fundamental
concerns expressed in Holmes. Further illustrating the absence of
proximate cause is the speculative nature of the proceedings that would
follow if Ideal were permitted to maintain its claim. A court would
have to calculate the portion of National’s price drop attributable to the
pattern of racketeering activity and then calculate the portion of lost
sales attributable to the relevant part of the price drop, but Holmes’
proximate causation element was meant to prevent such intricate, un
certain inquiries from overrunning RICO litigation. A direct causal
connection is especially warranted where the immediate victims can be
expected to vindicate the laws by pursuing their own claims. Contrary
to the Second Circuit’s rationale, a RICO plaintiff cannot circumvent the
proximate-cause requirement simply by claiming that the defendant’s
aim was to increase market share at a competitor’s expense. Because
Ideal has not satisfied that requirement, this Court has no occasion to
address the substantial question whether a plaintiff asserting a RICO
claim predicated on mail or wire fraud must show that it relied on the
defendant’s misrepresentations. Pp. 456–461.
2. The Second Circuit’s judgment with respect to Ideal’s § 1962(a)
claim is vacated so that court can determine on remand whether peti
tioners’ alleged § 1962(a) violation proximately caused Ideal’s asserted
injuries. Pp. 461–462.
373 F. 3d 251, reversed in part, vacated in part, and remanded.
Kennedy, J., delivered the opinion of the Court, in which Roberts,
C. J., and Stevens, Scalia, Souter, Ginsburg, and Alito, JJ., joined,
and in which Thomas, J., joined as to Part III. Scalia, J., filed a concur
ring opinion, post, p. 462. Thomas, J., post, p. 463, and Breyer, J., post,
p. 479, filed opinions concurring in part and dissenting in part.

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Opinion of the Court
David C. Frederick argued the cause for petitioners.
With him on the briefs were Richard L. Huffman, William
M. Brodsky, and V. David Rivkin.
Kevin P. Roddy argued the cause and filed a brief for
respondent.*
Justice Kennedy delivered the opinion of the Court.
The Racketeer Influenced and Corrupt Organizations Act
(RICO), 18 U. S. C. §§ 1961–1968 (2000 ed. and Supp. III),
prohibits certain conduct involving a “pattern of racketeer
ing activity.” § 1962 (2000 ed.). One of RICO’s enforce
ment mechanisms is a private right of action, available to
“[a]ny person injured in his business or property by reason
of a violation” of RICO’s substantive restrictions. § 1964(c).
In Holmes v. Securities Investor Protection Corporation,
503 U. S. 258, 268 (1992), this Court held that a plaintiff may
sue under § 1964(c) only if the alleged RICO violation was
the proximate cause of the plaintiff ’s injury. The instant
case requires us to apply the principles discussed in Holmes
to a dispute between two competing businesses.
I
Because this case arises from a motion to dismiss, we ac
cept as true the factual allegations in the amended com
plaint. See Leatherman v. Tarrant County Narcotics Intel
ligence and Coordination Unit, 507 U. S. 163, 164 (1993).
Respondent Ideal Steel Supply Corporation (Ideal) sells
steel mill products along with related supplies and services.
It operates two store locations in New York, one in Queens
and the other in the Bronx. Petitioner National Steel Sup
*Gene C. Schaerr, Linda T. Coberly, Charles B. Klein, Robin S. Conrad,
and Amar D. Sarwal filed a brief for the Chamber of Commerce of the
United States of America as amicus curiae urging reversal.
Henry H. Rossbacher and G. Robert Blakey filed a brief for the National
Association of Shareholder and Consumer Attorneys as amicus curiae ur
ging affirmance.

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454 ANZA v. IDEAL STEEL SUPPLY CORP.
Opinion of the Court
ply, Inc. (National), owned by petitioners Joseph and Vincent
Anza, is Ideal’s principal competitor. National offers a simi
lar array of products and services, and it, too, operates one
store in Queens and one in the Bronx.
Ideal sued petitioners in the United States District Court
for the Southern District of New York. It claimed petition
ers were engaged in an unlawful racketeering scheme aimed
at “gain[ing] sales and market share at Ideal’s expense.”
App. 7. According to Ideal, National adopted a practice of
failing to charge the requisite New York sales tax to cash
paying customers, even when conducting transactions that
were not exempt from sales tax under state law. This prac
tice allowed National to reduce its prices without affecting
its profit margin. Petitioners allegedly submitted fraudu
lent tax returns to the New York State Department of Taxa
tion and Finance in an effort to conceal their conduct.
Ideal’s amended complaint contains, as relevant here, two
RICO claims. The claims assert that petitioners, by submit
ting the fraudulent tax returns, committed various acts of
mail fraud (when they sent the returns by mail) and wire
fraud (when they sent them electronically). See 18 U. S. C.
§§ 1341, 1343 (2000 ed., Supp. III). Mail fraud and wire
fraud are forms of “racketeering activity” for purposes of
RICO. § 1961(1)(B). Petitioners’ conduct allegedly consti
tuted a “pattern of racketeering activity,” see § 1961(5) (2000
ed.), because the fraudulent returns were submitted on an
ongoing and regular basis.
Ideal asserts in its first cause of action that Joseph and
Vincent Anza violated § 1962(c), which makes it unlawful for
“any person employed by or associated with any enterprise
engaged in, or the activities of which affect, interstate or
foreign commerce, to conduct or participate, directly or indi
rectly, in the conduct of such enterprise’s affairs through a
pattern of racketeering activity or collection of unlawful
debt.” The complaint states that the Anzas’ goal, which

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they achieved, was to give National a competitive advantage
over Ideal.
The second cause of action is asserted against all three
petitioners. It alleges a violation of § 1962(a), which makes
it unlawful for any person who has received income derived
from a pattern of racketeering activity “to use or invest”
that income “in acquisition of any interest in, or the estab
lishment or operation of,” an enterprise engaged in or affect
ing interstate or foreign commerce. As described in the
complaint, petitioners used funds generated by their fraudu
lent tax scheme to open National’s Bronx location. The
opening of this new facility caused Ideal to lose “significant
business and market share.” App. 18.
Petitioners moved to dismiss Ideal’s complaint under Fed
eral Rules of Civil Procedure 12(b)(6) and 9(b). The District
Court granted the Rule 12(b)(6) motion, holding that the
complaint failed to state a claim upon which relief could be
granted. The court began from the proposition that to as
sert a RICO claim predicated on mail fraud or wire fraud, a
plaintiff must have relied on the defendant’s misrepresenta
tions. Ideal not having alleged that it relied on petitioners’
false tax returns, the court concluded Ideal could not go for
ward with its RICO claims.
Ideal appealed, and the Court of Appeals for the Second
Circuit vacated the District Court’s judgment. 373 F. 3d
251 (2004). Addressing Ideal’s § 1962(c) claim, the court held
that where a complaint alleges a pattern of racketeering ac
tivity “that was intended to and did give the defendant a
competitive advantage over the plaintiff, the complaint ade
quately pleads proximate cause, and the plaintiff has stand
ing to pursue a civil RICO claim.” Id., at 263. This is the
case, the court explained, “even where the scheme depended
on fraudulent communications directed to and relied on by a
third party rather than the plaintiff.” Ibid.
The court reached the same conclusion with respect to
Ideal’s § 1962(a) claim. It reasoned that Ideal adequately

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456 ANZA v. IDEAL STEEL SUPPLY CORP.
Opinion of the Court
pleaded its claim because it alleged an injury by reason of
petitioners’ use and investment of racketeering proceeds, “as
distinct from injury traceable simply to the predicate acts of
racketeering alone or to the conduct of the business of the
enterprise.” Id., at 264.
We granted certiorari. 546 U. S. 1029 (2005).
II
Our analysis begins—and, as will become evident, largely
ends—with Holmes. That case arose from a complaint filed
by the Securities Investor Protection Corporation (SIPC), a
private corporation with a duty to reimburse the customers
of registered broker-dealers who became unable to meet
their financial obligations. SIPC claimed that the peti
tioner, Robert Holmes, conspired with others to manipulate
stock prices. When the market detected the fraud, the
share prices plummeted, and the “decline caused [two]
broker-dealers’ financial difficulties resulting in their even
tual liquidation and SIPC’s advance of nearly $13 million to
cover their customers’ claims.” 503 U. S., at 262, 263.
SIPC sued on several theories, including that Holmes par
ticipated in the conduct of an enterprise’s affairs through a
pattern of racketeering activity in violation of § 1962(c) and
conspired to do so in violation of § 1962(d).
The Court held that SIPC could not maintain its RICO
claims against Holmes for his alleged role in the scheme.
The decision relied on a careful interpretation of § 1964(c),
which provides a civil cause of action to persons injured “by
reason of ” a defendant’s RICO violation. The Court recog
nized the phrase “by reason of ” could be read broadly to
require merely that the claimed violation was a “but for”
cause of the plaintiff ’s injury. Id., at 265–266. It rejected
this reading, however, noting the “unlikelihood that Con
gress meant to allow all factually injured plaintiffs to re
cover.” Id., at 266.

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Proper interpretation of § 1964(c) required consideration of
the statutory history, which revealed that “Congress mod
eled § 1964(c) on the civil-action provision of the federal anti
trust laws, § 4 of the Clayton Act.” Id., at 267. In Associ
ated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U. S.
519 (1983), the Court held that “a plaintiff ’s right to sue
under § 4 required a showing that the defendant’s violation
not only was a ‘but for’ cause of his injury, but was the proxi
mate cause as well.” Holmes, supra, at 268 (citing Associ
ated Gen. Contractors, supra, at 534). This reasoning, the
Court noted in Holmes, “applies just as readily to § 1964(c).”
503 U. S., at 268.
The Holmes Court turned to the common-law foundations
of the proximate-cause requirement, and specifically the “de
mand for some direct relation between the injury asserted
and the injurious conduct alleged.” Ibid. It concluded that
even if SIPC were subrogated to the rights of certain ag
grieved customers, the RICO claims could not satisfy this
requirement of directness. The deficiency, the Court ex
plained, was that “the link is too remote between the stock
manipulation alleged and the customers’ harm, being purely
contingent on the harm suffered by the broker-dealers.”
Id., at 271.
Applying the principles of Holmes to the present case, we
conclude Ideal cannot maintain its claim based on § 1962(c).
Section 1962(c), as noted above, forbids conducting or partici
pating in the conduct of an enterprise’s affairs through a pat
tern of racketeering activity. The Court has indicated the
compensable injury flowing from a violation of that provision
“necessarily is the harm caused by predicate acts sufficiently
related to constitute a pattern, for the essence of the viola
tion is the commission of those acts in connection with the
conduct of an enterprise.” Sedima, S. P. R. L. v. Imrex Co.,
473 U. S. 479, 497 (1985).
Ideal’s theory is that Joseph and Vincent Anza harmed it
by defrauding the New York tax authority and using the

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proceeds from the fraud to offer lower prices designed to
attract more customers. The RICO violation alleged by
Ideal is that the Anzas conducted National’s affairs through
a pattern of mail fraud and wire fraud. The direct victim of
this conduct was the State of New York, not Ideal. It was
the State that was being defrauded and the State that lost
tax revenue as a result.
The proper referent of the proximate-cause analysis is an
alleged practice of conducting National’s business through a
pattern of defrauding the State. To be sure, Ideal asserts
it suffered its own harms when the Anzas failed to charge
customers for the applicable sales tax. The cause of Ideal’s
asserted harms, however, is a set of actions (offering lower
prices) entirely distinct from the alleged RICO violation (de
frauding the State). The attenuation between the plaintiff ’s
harms and the claimed RICO violation arises from a differ
ent source in this case than in Holmes, where the alleged
violations were linked to the asserted harms only through
the broker-dealers’ inability to meet their financial obliga
tions. Nevertheless, the absence of proximate causation is
equally clear in both cases.
This conclusion is confirmed by considering the directness
requirement’s underlying premises. See 503 U. S., at 269–
270. One motivating principle is the difficulty that can arise
when a court attempts to ascertain the damages caused by
some remote action. See id., at 269 (“[T]he less direct an
injury is, the more difficult it becomes to ascertain the
amount of a plaintiff ’s damages attributable to the violation,
as distinct from other, independent, factors”). The instant
case is illustrative. The injury Ideal alleges is its own loss
of sales resulting from National’s decreased prices for cash
paying customers. National, however, could have lowered
its prices for any number of reasons unconnected to the as
serted pattern of fraud. It may have received a cash inflow
from some other source or concluded that the additional sales
would justify a smaller profit margin. Its lowering of prices

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in no sense required it to defraud the state tax authority.
Likewise, the fact that a company commits tax fraud does
not mean the company will lower its prices; the additional
cash could go anywhere from asset acquisition to research
and development to dividend payouts. Cf. id., at 271 (“The
broker-dealers simply cannot pay their bills, and only that
intervening insolvency connects the conspirators’ acts to the
losses suffered by the nonpurchasing customers and general
creditors”).
There is, in addition, a second discontinuity between the
RICO violation and the asserted injury. Ideal’s lost sales
could have resulted from factors other than petitioners’ al
leged acts of fraud. Businesses lose and gain customers for
many reasons, and it would require a complex assessment to
establish what portion of Ideal’s lost sales were the product
of National’s decreased prices. Cf. id., at 272–273 (“If the
nonpurchasing customers were allowed to sue, the district
court would first need to determine the extent to which their
inability to collect from the broker-dealers was the result of
the alleged conspiracy to manipulate, as opposed to, say, the
broker-dealers’ poor business practices or their failures to
anticipate developments in the financial markets”).
The attenuated connection between Ideal’s injury and the
Anzas’ injurious conduct thus implicates fundamental con
cerns expressed in Holmes. Notwithstanding the lack of
any appreciable risk of duplicative recoveries, which is an
other consideration relevant to the proximate-cause inquiry,
see id., at 269, these concerns help to illustrate why Ideal’s
alleged injury was not the direct result of a RICO violation.
Further illustrating this point is the speculative nature of
the proceedings that would follow if Ideal were permitted to
maintain its claim. A court considering the claim would
need to begin by calculating the portion of National’s price
drop attributable to the alleged pattern of racketeering ac
tivity. It next would have to calculate the portion of Ideal’s
lost sales attributable to the relevant part of the price drop.

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460 ANZA v. IDEAL STEEL SUPPLY CORP.
Opinion of the Court
The element of proximate causation recognized in Holmes is
meant to prevent these types of intricate, uncertain inquiries
from overrunning RICO litigation. It has particular reso
nance when applied to claims brought by economic competi
tors, which, if left unchecked, could blur the line between
RICO and the antitrust laws.
The requirement of a direct causal connection is especially
warranted where the immediate victims of an alleged RICO
violation can be expected to vindicate the laws by pursuing
their own claims. See id., at 269–270 (“[D]irectly injured
victims can generally be counted on to vindicate the law as
private attorneys general, without any of the problems at
tendant upon suits by plaintiffs injured more remotely”).
Again, the instant case is instructive. Ideal accuses the
Anzas of defrauding the State of New York out of a substan
tial amount of money. If the allegations are true, the State
can be expected to pursue appropriate remedies. The adju
dication of the State’s claims, moreover, would be relatively
straightforward; while it may be difficult to determine facts
such as the number of sales Ideal lost due to National’s tax
practices, it is considerably easier to make the initial calcula
tion of how much tax revenue the Anzas withheld from the
State. There is no need to broaden the universe of action
able harms to permit RICO suits by parties who have been
injured only indirectly.
The Court of Appeals reached a contrary conclusion, ap
parently reasoning that because the Anzas allegedly sought
to gain a competitive advantage over Ideal, it is immaterial
whether they took an indirect route to accomplish their goal.
See 373 F. 3d, at 263. This rationale does not accord
with Holmes. A RICO plaintiff cannot circumvent the
proximate-cause requirement simply by claiming that the de
fendant’s aim was to increase market share at a competitor’s
expense. See Associated Gen. Contractors, 459 U. S., at 537
(“We are also satisfied that an allegation of improper mo

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tive . . . is not a panacea that will enable any complaint to
withstand a motion to dismiss”). When a court evaluates a
RICO claim for proximate causation, the central question it
must ask is whether the alleged violation led directly to the
plaintiff ’s injuries. In the instant case, the answer is no.
We hold that Ideal’s § 1962(c) claim does not satisfy the re
quirement of proximate causation.
Petitioners alternatively ask us to hold, in line with the
District Court’s decision granting petitioners’ motion to dis
miss, that a plaintiff may not assert a RICO claim predicated
on mail fraud or wire fraud unless it demonstrates it relied
on the defendant’s misrepresentations. They argue that
RICO’s private right of action must be interpreted in light
of common-law principles, and that at common law a fraud
action requires the plaintiff to prove reliance. Because
Ideal has not satisfied the proximate-cause requirement ar
ticulated in Holmes, we have no occasion to address the sub
stantial question whether a showing of reliance is required.
Cf. 503 U. S., at 275–276.
III
The amended complaint also asserts a RICO claim based
on a violation of § 1962(a). The claim alleges petitioners’ tax
scheme provided them with funds to open a new store in the
Bronx, which attracted customers who otherwise would have
purchased from Ideal.
In this Court petitioners contend that the proximate-cause
analysis should function identically for purposes of Ideal’s
§ 1962(c) claim and its § 1962(a) claim. (Petitioners also con
tend that “a civil RICO plaintiff does not plead an injury
proximately caused by a violation of § 1962(a) merely by al
leging that a corporate defendant reinvested profits back
into itself,” Brief for Petitioners 20, n. 5, but this argument
has not been developed, and we decline to address it.) It
is true that private actions for violations of § 1962(a), like
actions for violations of § 1962(c), must be asserted under

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462 ANZA v. IDEAL STEEL SUPPLY CORP.
Scalia, J., concurring
§ 1964(c). It likewise is true that a claim is cognizable under
§ 1964(c) only if the defendant’s alleged violation proximately
caused the plaintiff ’s injury. The proximate-cause inquiry,
however, requires careful consideration of the “relation be
tween the injury asserted and the injurious conduct al
leged. ” Holmes, supra, at 268. Because § 1962(c) and
§ 1962(a) set forth distinct prohibitions, it is at least debat
able whether Ideal’s two claims should be analyzed in an
identical fashion for proximate-cause purposes.
The Court of Appeals held that Ideal adequately pleaded
its § 1962(a) claim, see 373 F. 3d, at 264, but the court did not
address proximate causation. We decline to consider Ideal’s
§ 1962(a) claim without the benefit of the Court of Appeals’
analysis, particularly given that the parties have devoted
nearly all their attention in this Court to the § 1962(c) claim.
We therefore vacate the Court of Appeals’ judgment with
respect to Ideal’s § 1962(a) claim. On remand, the court
should determine whether petitioners’ alleged violation of
§ 1962(a) proximately caused the injuries Ideal asserts.
* * *
The judgment of the Court of Appeals is reversed in part
and vacated in part. The case is remanded for further pro
ceedings consistent with this opinion.
It is so ordered.
Justice Scalia, concurring.
I join the opinion of the Court. I also note that it is incon
ceivable that the injury alleged in the 18 U. S. C. § 1962(c)
claim at issue here is within the zone of interests protected
by the RICO cause of action for fraud perpetrated upon New
York State. See Holmes v. Securities Investor Protection
Corporation, 503 U. S. 258, 286–290 (1992) (Scalia, J., con
curring in judgment).

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Opinion of Thomas, J.
Justice Thomas, concurring in part and dissenting in
part.
The Court today limits the lawsuits that may be brought
under the civil enforcement provision of the Racketeer In
fluenced and Corrupt Organizations Act (RICO or Act), 18
U. S. C. § 1961 et seq. (2000 ed. and Supp. III), by adopting
a theory of proximate causation that is supported neither
by the Act nor by our decision in Holmes v. Securities Inves
tor Protection Corporation, 503 U. S. 258, 268 (1992), on
which the Court principally relies. The Court’s stringent
proximate-causation requirement succeeds in precluding re
covery in cases alleging a violation of § 1962(c) that, like the
present one, have nothing to do with organized crime, the
target of the RICO statute. However, the Court’s approach
also eliminates recovery for plaintiffs whose injuries are pre
cisely those that Congress aimed to remedy through the au
thorization of civil RICO suits. Because this frustration of
congressional intent is directly contrary to the broad lan
guage Congress employed to confer a RICO cause of action,
I respectfully dissent from Part II of the Court’s opinion.
I
The language of the civil RICO provision, which broadly
permits recovery by “[a]ny person injured in his business or
property by reason of a violation” of the Act’s substantive
restrictions, § 1964(c) (2000 ed.), plainly covers the lawsuit
brought by respondent. Respondent alleges that it was in
jured in its business, and that this injury was the direct re
sult of petitioners’ violation of § 1962(c).1 App. 12–17. In
1 Respondent also alleges that petitioners injured its business through a
violation of § 1962(a), although the parties dedicate little attention to this
issue. In light of the Court’s disposition of the § 1962(c) claim and the
limited discussion of § 1962(a) by the parties, I agree with the Court that
we should give the Court of Appeals the first opportunity to reconsider
the § 1962(a) claim. Accordingly, I join Part III of the Court’s opinion.

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464 ANZA v. IDEAL STEEL SUPPLY CORP.
Opinion of Thomas, J.
Holmes, however, we held that a RICO plaintiff is required
to show that the RICO violation “not only was a ‘but for’
cause of his injury, but was the proximate cause as well.”
503 U. S., at 268. We employed the term “ ‘proximate cause’
to label generically the judicial tools used to limit a person’s
responsibility for the consequences of that person’s own
acts.” Ibid. These tools reflect “ ‘ideas of what justice de
mands, or of what is administratively possible and conven
ient.’ ” Ibid. (quoting W. Keeton, D. Dobbs, R. Keeton, & D.
Owen, Prosser and Keeton on Law of Torts § 41, p. 264 (5th
ed. 1984) (hereinafter Prosser & Keeton)).
Invoking one of the common-law proximate-cause consid
erations, we held that a RICO plaintiff must prove “some
direct relation between the injury asserted and the injurious
conduct alleged.” 503 U. S., at 268. Today the Court ap
plies this formulation to conclude that the “attenuated rela
tionship” between the violation of § 1962(c) and Ideal’s injury
“implicates fundamental concerns expressed in Holmes” and
that the “absence of proximate causation is equally clear in
both cases.” Ante, at 459, 458. But the Court’s determina
tion relies on a theory of “directness” distinct from that
adopted by Holmes.
In Holmes, the Court explained that “a plaintiff who com
plained of harm flowing merely from the misfortunes visited
upon a third person by the defendant’s acts was generally
said to stand at too remote a distance to recover.” 503 U. S.,
at 268–269. The plaintiff in Holmes was indirect in pre
cisely this sense. The defendant was alleged to have partici
pated in a stock manipulation scheme that disabled two
broker-dealers from meeting their obligations to customers.
Accordingly, the plaintiff, Securities Investor Protection
Corporation (SIPC), had to advance nearly $13 million to
cover the claims of customers of those broker-dealers.
SIPC attempted to sue based on the claim that it was subro
gated to the rights of those customers of the broker-dealers
who did not purchase manipulated securities. We held that

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the nonpurchasing customers’ injury was not proximately
caused by the defendant’s conduct, because “the conspirators
have allegedly injured these customers only insofar as the
stock manipulation first injured the broker-dealers and left
them without the wherewithal to pay customers’ claims.”
Id., at 271.2
Here, in contrast, it was not New York’s injury that caused
respondent’s damages; rather, it was petitioners’ own con
duct—namely, their underpayment of tax—that permitted
them to undercut respondent’s prices and thereby take away
its business. Indeed, the Court’s acknowledgment that
there is no appreciable risk of duplicative recovery here, in
contrast to Holmes, ante, at 459, is effectively a concession
that petitioners’ damages are not indirect, as that term is used
in Holmes. See 503 U. S., at 269 (“[R]ecognizing claims of
the indirectly injured would force courts to adopt complicated
rules apportioning damages among plaintiffs removed at dif
ferent levels of injury from the violative acts, to obviate the
risk of multiple recoveries”). The mere fact that New York
is a direct victim of petitioners’ RICO violation does not pre
clude Ideal’s claim that it too is a direct victim. Because the
petitioners’ tax underpayment directly caused respondent’s
injury, Holmes does not bar respondent’s recovery.
The Court nonetheless contends that respondent has failed
to demonstrate proximate cause. It does so by relying on
our observation in Holmes that the directness require
ment is appropriate because “ ‘[t]he less direct an injury is,
the more difficult it becomes to ascertain the amount of a
2 Sutherland’s treatise on damages, on which the Court relied in Holmes,
labels the same type of claims indirect: those where one party is injured,
and it is that very injury—and not the wrongful behavior by the tortfea
sor—that causes the injury to the plaintiff. See 1 J. Sutherland, Law of
Damages 55 (1882) (hereinafter Sutherland). Indeed, every example cited
in Sutherland in illustration of this principle parallels Holmes; the plaintiff
would not be injured absent the injury to another victim. See Suther
land 55–56.

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plaintiff ’s damages attributable to the violation, as distinct
from other, independent, factors.’ ” Ante, at 458 (quoting
Holmes, supra, at 269, in turn, citing Associated Gen. Con
tractors of Cal., Inc. v. Carpenters, 459 U. S. 519 (1983)). In
Holmes, we noted that it would be hard for the District
Court to determine how much of the broker-dealers’ failure
to pay their customers was due to the fraud and how much
was due to other factors affecting the broker-dealers’ busi
ness success. 503 U. S., at 273–274. The Court contends
that here, as in Holmes, it is difficult to “ascertain the dam
ages caused by some remote action.” Ante, at 458.
The Court’s reliance on the difficulty of ascertaining the
amount of Ideal’s damages caused by petitioners’ unlawful
acts to label those damages indirect is misguided. Holmes
and Associated General Contractors simply held that one
reason that indirect injuries should not be compensable is
that such injuries are difficult to ascertain. Holmes, supra,
at 269; Associated Gen. Contractors, supra, at 542. We did
not adopt the converse proposition that any injuries that are
difficult to ascertain must be classified as indirect for pur
poses of determining proximate causation.3
Proximate cause and certainty of damages, while both re
lated to the plaintiff ’s responsibility to prove that the amount
of damages he seeks is fairly attributable to the defendant,
are distinct requirements for recovery in tort.4 See 4 Re
3 Indeed, in Associated General Contractors, we did not even squarely
hold that the reason that indirect damages are not compensable was that
the damages were not easily ascertainable; instead, we merely recognized
the empirical fact that “[p]artly because it is indirect, and partly because
the alleged effects on the Union may have been produced by independent
factors, the Union’s damages claim is also highly speculative.” 459 U. S.,
at 542.
4 Sutherland described the interrelation between the two concepts:
“A fatal uncertainty may infect a case where an injury is easily provable,
but the alleged responsible cause cannot be sufficiently established as to
the whole or some part of that injury. So it may exist where a known

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statement (Second) of Torts § 912 (1977) (certainty of dam
ages); 2 id., §§ 430–431 (1963–1964) (proximate causation).
That is, to recover, a plaintiff must show both that his injury
is sufficiently connected to the tort that “the moral judgment
and practical sense of mankind [will] recognize responsibility
in the domain of morals,” Sutherland 18, and that the spe
cific pecuniary advantages, the loss of which is alleged as
damages, “would have resulted, and, therefore, that the act
complained of prevented them,” id., at 106–107. Holmes
and Associated General Contractors dealt primarily with
the former showing. The Court’s discussion of the union’s
“highly speculative” damages in Associated General Con
tractors focused not on the difficulty of proving the precise
amount of damages, but with “the tenuous and speculative
character of the relationship between the alleged antitrust
violation and the Union’s alleged injury.” 459 U. S., at 545.
Here, the relationship between the alleged RICO violation
and the alleged injury is clear: Petitioners underpaid sales
tax, permitting them to undercharge sales tax, inflicting
competitive injury on respondent. The question with which
the Court expresses concern—whether Ideal can prove the
amount of its actual damages “with sufficient certainty,”
Sutherland 106, 107, to permit recovery—is simply not be
fore the Court.
It is nonetheless worth noting that the Court overstates
the difficulties of proof faced by respondent in this case.
Certainly the plaintiff in this case, as in all tort cases involv
ing damage to business, must demonstrate that he suffered a
harm caused by the tort, and not merely by external market
conditions. See generally Prosser & Keeton § 130, at 1014–
1015, and nn. 92–99 (gathering cases authorizing liability for
torts that “depriv[e] the plaintiff of customers or other pros
pects”); cf. Dura Pharmaceuticals, Inc. v. Broudo, 544 U. S.
and provable wrong or violation of contract appears, but the alleged loss
or injury as a result of it cannot be certainly shown.” Sutherland 94.

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336, 342 (2005) (“[A]n inflated purchase price will not itself
constitute or proximately cause the relevant economic loss,”
absent evidence that it was the inflated price that actually
caused harm). But under the facts as alleged by Ideal, Na
tional did not generally lower its prices, so the Court need
not inquire into “any number of reasons,” ante, at 458, that
it might have done so.5 Instead, it simply ceased charging
tax on cash sales, allegedly, and logically, because it had
ceased reporting those sales and accordingly was not itself
paying sales tax on them. App. 11–13. Nor is it fatal to
Ideal’s proof of damages that National could have continued
to charge taxes to its customers and invested the additional
money elsewhere. Ante, at 459. Had National actually
done so, it might be difficult to ascertain the damages suf
fered by Ideal as a result of that investment. But the mere
fact that National could have committed tax fraud without
readily ascertainable injury to Ideal does not mean that its
tax fraud necessarily caused no readily ascertainable injury
in this case. Likewise, the Court is undoubtedly correct
that “Ideal’s lost sales could have resulted from factors other
than petitioners’ alleged acts of fraud.” Ibid. However,
the means through which the fraudulent scheme was carried
out—with sales tax charged on noncash sales, but no tax
charged on cash sales—renders the damages more ascertain
able than in the typical case of lost business. In any event,
it is well within the expertise of a district court to evaluate
testimony and evidence and determine what portion of
5 Nor is it fair to require a plaintiff to prove that the tort caused the
lowering of prices at the motion to dismiss stage. Ideal’s complaint al
leges that petitioners “pass on to National’s customers the sales tax ‘sav
ings’ that National realizes as a result of its false returns.” App. 16.
This allegation that, as a factual matter, National was able to charge a
lower price after tax because of its fraud suffices to permit Ideal to survive
a motion to dismiss on the question whether the prices were lowered due
to the fraud, as opposed to other factors.

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Ideal’s lost sales are attributable to National’s lower prices
and what portion to other factors.
The Court also relies on an additional reason Holmes gave
for limiting recovery to direct victims—namely, that “[t]he
requirement of a direct causal connection is especially war
ranted where the immediate victims of an alleged RICO vio
lation can be expected to vindicate the laws by pursuing
their own claims.” Ante, at 460 (citing Holmes, 503 U. S., at
269–270). Certainly, New York can sue here and vindicate
the law, rendering respondent’s enforcement of the law less
necessary than it would be if respondent were the only direct
victim of the illegal activity. But our recognition in Holmes
that limiting recovery to direct victims would not undermine
deterrence does not support the conclusion that any victim
whose lawsuit is unnecessary for deterrence is an indirect
victim. Indeed, in any tort case with multiple possible
plaintiffs, a single plaintiff ’s lawsuit could suffice to vindi
cate the law. If multiple plaintiffs are direct victims of a
tort, it would be unjust to declare some of their lawsuits
unnecessary for deterrence, absent any basis for doing so in
the relevant statute. Because respondent’s injuries re
sult from petitioners’ fraud, and not from New York’s inju
ries, respondent has a right to recover equal to that of New
York.
Application of common-law principles of proximate causa
tion beyond the directness requirement likewise supports a
finding that causation was sufficiently pleaded in this case.
Though the Holmes Court noted that directness was “one of
[the] central elements” it had considered in evaluating causa
tion, it recognized that proximate causation took “many
shapes” at common law. Id., at 268, 269. Cf. Prosser &
Keeton § 42, at 273 (noting “two contrasting theories of legal
cause,” one extending liability to, but not beyond, “the scope
of the ‘foreseeable risks,’ ” and the other extending liability
to, but not beyond, all “ ‘directly traceable’ ” consequences

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and those indirect consequences that are foreseeable).6 The
proximate-cause limitation serves to ensure that “a defend
ant is not answerable for anything beyond the natural, ordi
nary and reasonable consequences of his conduct.” Suther
land 57. “If one’s fault happens to concur with something
extraordinary, and therefore not likely to be foreseen, he will
not be answerable for such unexpected result. ” Ibid.
Based on this principle, courts have historically found proxi
mate causation for injuries from natural causes, if a wrongful
act “rendered it probable that such an injury will occur,” id.,
at 62; for injuries where the plaintiff ’s reliance is the immedi
ate cause, such as in an action for fraud, so long as the reli
ance was “reasonably induced by the prior misconduct of the
defendant,” id., at 62, 63; and for injuries where an innocent
third party intervenes between the tortfeasor and the vic
tim, such that the innocent third party is the immediate
cause of the injury, so long as the tortfeasor “contributed so
effectually to [the injury] as to be regarded as the efficient
or at least concurrent and responsible cause,” id., at 64, 65
(emphasis deleted).
The Court of Appeals, by limiting RICO plaintiffs to those
who are “ ‘the targets, competitors and intended victims of
the racketeering enterprise,’ ” 373 F. 3d 251, 260 (CA2 2004)
(quoting Lerner v. Fleet Bank, N. A., 318 F. 3d 113, 124 (CA2
2003)), outlined a proximate-causation standard that falls
well in line both with the reasoning behind having a
proximate-cause requirement at all, and with the traditional
applications of this standard to tortfeasors who caused injury
only through a two-step process. The Court, in contrast,
permits a defendant to evade liability for harms that are not
only foreseeable, but the intended consequences of the de
fendant’s unlawful behavior. A defendant may do so simply
by concocting a scheme under which a further, lawful and
6 Prosser and Keeton appear to use “direct” in a broader sense than
that adopted by the Court in Holmes. See Prosser & Keeton § 43, at
273, 293–297.

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intentional step by the defendant is required to inflict the
injury. Such a rule precludes recovery for injuries for
which the defendant is plainly morally responsible and which
are suffered by easily identifiable plaintiffs. There is no
basis in the RICO statute, in common-law tort, or in Holmes
for reaching this result.
II
Because neither the plain language of the civil RICO pro
vision nor our precedent supports the Court’s holding, it
must be rejected. It is worth noting, however, that while
the Court’s holding in the present case may prevent litigation
in an area far removed from the concerns about organized
crime that led to RICO’s enactment, that holding also pre
cludes civil recovery for losses sustained by business compet
itors as a result of quintessential organized criminal activity,
cases Congress indisputably intended its broad language to
reach.
Congress plainly enacted RICO to address the problem of
organized crime, and not to remedy general state-law crimi
nal violations. See H. J. Inc. v. Northwestern Bell Tele
phone Co., 492 U. S. 229, 245 (1989). There is some evidence,
to be sure, that the drafters knew that RICO would have
the potential to sweep more broadly than organized crime
and did not find that problematic. Id., at 246–248. Never
theless, the Court has recognized that “in its private civil
version, RICO is evolving into something quite different
from the original conception of its enactors. ” Sedima,
S. P. R. L. v. Imrex Co., 473 U. S. 479, 500 (1985).
Judicial sentiment that civil RICO’s evolution is undesir
able is widespread.7 Numerous Justices have expressed dis
7 See Rehnquist, Remarks of the Chief Justice, 21 St. Mary’s L. J. 5, 13
(1989) (“I think that the time has arrived for Congress to enact amend
ments to civil RICO to limit its scope to the sort of wrongs that are con
nected to organized crime, or have some other reason for being in federal
court”); Sentelle, Civil RICO: The Judges’ Perspective, and Some Notes
on Practice for North Carolina Lawyers, 12 Campbell L. Rev. 145, 148

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satisfaction with either the breadth of RICO’s application,
id., at 501 (Marshall, J., joined by Brennan, Blackmun, and
Powell, JJ., dissenting) (“The Court’s interpretation of the
civil RICO statute quite simply revolutionizes private litiga
tion; it validates the federalization of broad areas of state
common law of frauds, and it approves the displacement of
well-established federal remedial provisions. . . . [T]here is
no indication that Congress even considered, much less ap
proved, the scheme that the Court today defines”), or its gen
eral vagueness at outlining the conduct it is intended to pro
hibit, H. J. Inc., supra, at 255–256 (Scalia, J., joined by
Rehnquist, C. J., and O’Connor and Kennedy, JJ., concurring
in judgment) (“No constitutional challenge to this law has
been raised in the present case . . . . That the highest Court
in the land has been unable to derive from this statute any
thing more than today’s meager guidance bodes ill for the
day when that challenge is presented”). Indeed, proposals
for curtailing civil RICO have been introduced in Congress;
for example, the Private Securities Litigation Reform Act,
enacted in 1995, removed securities fraud as a predicate act
under RICO. Pub. L. 104–67, § 107, 109 Stat. 758, amending
18 U. S. C. § 1964(c); see also Abrams, Crime Legislation and
the Public Interest: Lessons from Civil RICO, 50 SMU
L. Rev. 33, 34 (1996).
This case, like the majority of civil RICO cases, has no
apparent connection to organized crime. See Sedima, 473
U. S., at 499, n. 16 (quoting an ABA Task Force determina
tion that, over the period reviewed, only 9% of civil RICO
cases at the trial court level involved “ ‘allegations of crimi
nal activity of a type generally associated with professional
criminals’ ”). Given the distance the facts of this case lie
(1990) (“[E]very single district judge with whom I have discussed the sub
ject (and I’m talking in the dozens of district judges from across the coun
try) echoes the entreaty expressed in the Chief Justice’s title in The Wall
Street Journal[, Get RICO Cases Out of My Courtroom, May 19, 1989,
p. A14, col. 4]”).

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from the prototypical organized criminal activity that led to
RICO’s enactment, it is tempting to find in the Act a limita
tion that will keep at least this and similar cases out of court.
The Court’s attempt to exclude this case from the reach of
civil RICO, however, succeeds in eliminating not only cases
that lie far outside the harm RICO was intended to correct,
but also those that were at the core of Congress’ concern in
enacting the statute. The Court unanimously recognized in
Sedima that one reason—and, for the dissent, the principal
reason—Congress enacted RICO was to protect businesses
against competitive injury from organized crime. See id.,
at 500–523 (Marshall, J., dissenting) (concluding that the pro
vision conferring a right of action on individual plaintiffs had
as its “principal target . . . the economic power of racketeers,
and its toll on legitimate businessmen”); id., at 494–500.
The unanimous view of the Sedima Court is correct. The
sponsor of a Senate precursor to RICO noted that “ ‘the evil
to be curbed is the unfair competitive advantage inherent in
the large amount of illicit income available to organized
crime.’ ” Id., at 514 (Marshall, J., dissenting) (quoting 113
Cong. Rec. 17999 (1967) (remarks of Sen. Hruska); some em
phasis deleted); see also 473 U. S., at 515 (Marshall, J., dis
senting) (“ ‘When organized crime moves into a business, it
brings all the techniques of violence and intimidation which
it used in its illegal businesses. Competitors are eliminated
and customers confined to sponsored suppliers’ ”). Upon
adding a provision for a civil remedy in a subsequently pro
posed bill, Senator Hruska noted:
“ ‘[This] bill also creates civil remedies for the honest
businessman who has been damaged by unfair competi
tion from the racketeer businessman. Despite the will
ingness of the courts to apply the Sherman Anti-Trust
Act to organized crime activities, as a practical matter
the legitimate businessman does not have adequate civil
remedies available under that act. This bill fills that

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gap.’ ” Id., at 516 (Marshall, J., dissenting) (quoting 115
Cong. Rec. 6993 (1969); emphasis deleted).
A portion of these bills was ultimately included in RICO,
which was attached as Title IX to the Organized Crime Con
trol Act. The Committee Report noted that the Title “has
as its purpose the elimination of the infiltration of organized
crime and racketeering into legitimate organizations operat
ing in interstate commerce.” S. Rep. No. 91–617, p. 76
(1969).
The observations of the President’s Commission on Law
Enforcement and Administration of Justice, the source of
much of the congressional concern over organized crime, are
consistent with these statements. Its chapter on organized
crime noted that “organized crime is also extensively and
deeply involved in legitimate business . . . . [I]t employs
illegitimate methods—monopolization, terrorism, extortion,
tax evasion—to drive out or control lawful ownership and
leadership and to exact illegal profits from the public.” The
Challenge of Crime in a Free Society 187 (1967). The report
noted that “[t]he millions of dollars [organized crime] can
throw into the legitimate economic system gives it power to
manipulate the price of shares on the stock market, to raise
or lower the price of retail merchandise, to determine
whether entire industries are union or nonunion, to make it
easier or harder for businessmen to continue in business.”
Ibid.
It is not difficult to imagine a competitive injury to a busi
ness that would result from the kind of organized crime that
Sedima, Congress, and the Commission all recognized as the
principal concern of RICO, yet that would fail the Court’s
restrictive proximate-cause test. For example, an organized
crime group, running a legitimate business, could, through
threats of violence, persuade its supplier to sell goods to it
at cost, so that it could resell those goods at a lower price to
drive its competitor out of the business. Honest business
men would be unable to compete, as they do not engage in

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threats of violence to lower their costs. Civil RICO, if it
was intended to do anything at all, was intended to give
those businessmen a cause of action. Cf. Sedima, 473 U. S.,
at 521–522 (Marshall, J., dissenting). Yet just like respond
ent, those businessmen would not themselves be the immedi
ate target of the threats; the target would be the supplier.
Like respondent’s injury, their injury would be most immedi
ately caused by the lawful activity of price competition, not
the unlawful activity of threatening the supplier. Accord
ingly, under the Court’s view, the honest businessman com
petitor would be just an “indirect” victim, whose injury was
not proximately caused by the RICO violation.8 Civil RICO
would thus confer no right to sue on the individual who did
not himself suffer the threats of violence, even if the threats
caused him harm.
As a result, after today, civil RICO plaintiffs that suffer
precisely the kind of injury that motivated the adoption of
the civil RICO provision will be unable to obtain relief. If
this result was compelled by the text of the statute, the in
terference with congressional intent would be unavoidable.
Given that the language is not even fairly susceptible of such
a reading, however, I cannot agree with this frustration of
congressional intent.
III
Because I conclude that Ideal has sufficiently pleaded
proximate cause, I must proceed to the question which the
Court does not reach: whether reliance is a required element
of a RICO claim predicated on mail or wire fraud and, if it is,
whether that reliance must be by the plaintiff. The Court of
Appeals held that reliance is required, but that “a RICO
claim based on mail fraud may be proven where the misrep
resentations were relied on by a third person, rather than
8 The honest businessman would likewise fail Justice Scalia’s theory
of proximate causation, because laws against threats of violence are in
tended to protect those who are so threatened, not other parties that
might suffer as a consequence. Ante, at 462 (concurring opinion).

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by the plaintiff.” 373 F. 3d, at 262, 263. I disagree with
the conclusion that reliance is required at all. In my view,
the mere fact that the predicate acts underlying a particular
RICO violation happen to be fraud offenses does not mean
that reliance, an element of common-law fraud, is also incor
porated as an element of a civil RICO claim.
Petitioners are correct that the common law generally re
quired a showing of justifiable reliance before a plaintiff
could recover for damages caused by fraud. See Neder v.
United States, 527 U. S. 1, 24–25 (1999); Prosser & Keeton
§ 105, at 728. But RICO does not confer on private plaintiffs
a right to sue defendants who engage in any act of common
law fraud; instead, racketeering activity includes, as relevant
to this case, “any act which is indictable under [18 U. S. C.
§] 1341 (relating to mail fraud) [and §] 1343 (relating to wire
fraud).” § 1961(1) (2000 ed., Supp. III). And we have rec
ognized that these criminal fraud statutes “did not incorpo
rate all the elements of common-law fraud.” Neder, 527
U. S., at 24. Instead, the criminal mail fraud statute applies
to anyone who, “having devised or intending to devise any
scheme or artifice to defraud . . . for the purpose of executing
such scheme or artifice or attempting so to do, places in any
post office . . . any matter or thing whatever to be sent or
delivered by the Postal Service . . . .” § 1341. See § 1343
(similar language for wire fraud). We have specifically
noted that “[b]y prohibiting the ‘scheme to defraud,’ rather
than the completed fraud, the elements of reliance . . . would
clearly be inconsistent with the statutes Congress enacted.”
Id., at 25.
Because an individual can commit an indictable act of mail
or wire fraud even if no one relies on his fraud, he can engage
in a pattern of racketeering activity, in violation of § 1962,
without proof of reliance. Accordingly, it cannot be disputed
that the Government could prosecute a person for such
behavior. The terms of § 1964(c) (2000 ed.), which broadly
authorize suit by “[a]ny person injured in his business or

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property by reason of a violation of section 1962,” permit
no different conclusion when an individual brings a civil ac
tion against such a RICO violator.
It is true that our decision in Holmes to apply the
common-law proximate-cause requirement was likewise not
compelled by the broad language of the statute. But our
decision in that case was justified by the “very unlikelihood
that Congress meant to allow all factually injured plaintiffs
to recover.” 503 U. S., at 266. This unlikelihood stems, in
part, from the nature of proximate cause, which is “not only
a general condition of civil liability at common law but is
almost essential to shape and delimit a rational remedy.”
Systems Management, Inc. v. Loiselle, 303 F. 3d 100, 104
(CA1 2002). We also decided Holmes in light of Congress’
decision to use the same words to impose civil liability under
RICO as it had in § 7 of the Sherman Act, 26 Stat. 210, into
which federal courts had implied a proximate-cause limita
tion. 503 U. S., at 268. Accordingly, it was fair to interpret
the broad language “by reason of ” as meaning, in all civil
RICO cases, that the violation must be both the cause-in-fact
and the proximate cause of the plaintiff ’s injury.
Here, by contrast, the civil action provision cannot be read
to always require that the plaintiff have relied on the defend
ant’s action. Reliance is not a general limitation on civil re
covery in tort; it “is a specialized condition that happens to
have grown up with common law fraud.” Loiselle, supra,
at 104. For most of the predicate acts underlying RICO vio
lations, it cannot be argued that the common law, if it even
recognized such acts as civilly actionable, required proof of
reliance. See § 1961 (2000 ed., Supp. III). In other words,
there is no language in § 1964(c) (2000 ed.) that could fairly
be read to add a reliance requirement in fraud cases only.
Nor is there any reason to believe that Congress would
have defined “racketeering activity” to include acts indict
able under the mail and wire fraud statutes, if it intended
fraud-related acts to be predicate acts under RICO only

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when those acts would have been actionable under the com
mon law.
Because reliance cannot be read into §§ 1341 and 1343, nor
into RICO itself, it is not an element of a civil RICO claim.
This is not to say that, in the general case, a plaintiff will
not have to prove that someone relied on the predicate act
of fraud as part of his case. If, for example, New York had
not believed petitioners’ misrepresentation with respect to
their sales, Ideal may well not have been injured by petition
ers’ scheme, which would have faltered at the first step. In
deed, petitioners recognize that “in the ordinary misrepre
sentation case, the reliance requirement simply functions as
a necessary prerequisite to establishing the causation re
quired by the language of § 1964(c).” Brief for Petitioners
29. But the fact that proof of reliance is often used to prove
an element of the plaintiff ’s cause of action, such as the ele
ment of causation, does not transform reliance itself into an
element of the cause of action. See Loiselle, supra, at 104
(“Reliance is doubtless the most obvious way in which fraud
can cause harm, but it is not the only way”). Because re
spondent need not allege reliance at all, its complaint, which
alleges that New York relied on petitioners’ misrepresenta
tions, App. 16, is more than sufficient.
* * *
The Congress that enacted RICO may never have in
tended to reach cases like the one before us, and may have
“federalize[d] a great deal of state common law” without any
intention of “produc[ing] these far-reaching results.” Se
dima, 473 U. S., at 506 (Marshall, J., dissenting). But this
Court has always refused to ignore the language of the stat
ute to limit it to “the archetypal, intimidating mobster,” and
has instead recognized that “[i]t is not for the judiciary to
eliminate the private action in situations where Congress has
provided it simply because plaintiffs are not taking advan
tage of it in its more difficult applications.” Id., at 499–500.

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Today, however, the Court not only eliminates private RICO
actions in some situations Congress may have inadvertently
regulated, but it substantially limits the ability of civil RICO
to reach even those cases that motivated Congress’ enact
ment of this provision in the first place. I respectfully
dissent.
Justice Breyer, concurring in part and dissenting in
part.
In my view, the civil damages remedy in the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18
U. S. C. §§ 1961–1968 (2000 ed. and Supp. III), does not cover
claims of injury by one competitor where the legitimate
procompetitive activity of another competitor immediately
causes that injury. I believe that this is such a case and
would consequently hold that RICO does not authorize the
private action here at issue.
I
A
RICO essentially seeks to prevent organized criminals
from taking over or operating legitimate businesses. Its
language, however, extends its scope well beyond those cen
tral purposes. RICO begins by listing certain predicate
acts, called “ ‘racketeering activity,’ ” which consist of other
crimes, ranging from criminal copyright activities, the facili
tation of gambling, and mail fraud to arson, kidnaping, and
murder. § 1961(1) (2000 ed., Supp. III). It then defines a
“ ‘pattern of racketeering activity’ ” to include engaging in
“at least two” predicate acts in a 10-year period. § 1961(5)
(2000 ed.). And it forbids certain business-related activities
involving such a “pattern” and an “enterprise.” The forbid
den activities include using funds derived from a “pattern of
racketeering activity” in acquiring, establishing, or operat
ing any enterprise, and conducting the affairs of any enter
prise through such “a pattern.” §§ 1962(a), (c).

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480 ANZA v. IDEAL STEEL SUPPLY CORP.
Opinion of Breyer, J.
RICO, a federal criminal statute, foresees criminal law
enforcement by the Federal Government. § 1963 (2000 ed.,
Supp. III). It also sets forth civil remedies. § 1964 (2000
ed.). District courts “have jurisdiction to prevent and re
strain [RICO] violations.” § 1964(a). And a person “in
jured in his business or property by reason of a [RICO]
violation” may seek treble damages and attorney’s fees.
§ 1964(c).
B
The present case is a private RICO treble-damages action.
A steel supply company, Ideal Steel, has sued a competing
steel supply company, National Steel, and its owners, Joseph
and Vincent Anza (to whom I shall refer collectively as “Na
tional”). Ideal says that National committed mail fraud by
regularly filing false New York state sales tax returns in
order to avoid paying sales tax that it owed—activity that
amounts to a “pattern of racketeering activity.” This activ
ity enabled National to charge lower prices without reducing
its profit margins. Ideal says National used some of these
excess profits to fund the building of a new store. Both the
lower prices and the new outlet attracted Ideal customers,
thereby injuring Ideal. Hence, says Ideal, it was injured
“in [its] business . . . by reason of ” violations of two RICO
provisions, the provision that forbids conducting an “enter
prise’s affairs” through a “pattern of racketeering activity”
and the provision that forbids investing funds derived from
such a “pattern” in an “enterprise.” §§ 1962(c), (a), 1964(c).
The question before us is whether RICO permits Ideal to
bring this private treble-damages claim.
II
This Court, in Holmes v. Securities Investor Protection
Corporation, 503 U. S. 258, 268 (1992), held that RICO’s pri
vate treble-damages provision “demand[ed] . . . some direct
relation between the injury asserted and the injurious con
duct alleged.” The Court then determined that the injury

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Opinion of Breyer, J.
alleged by the plaintiff in that case was too remote from the
injurious conduct to satisfy this requirement.
I do not agree with the majority insofar as it believes that
Holmes’ holding in respect to the fact pattern there at issue
virtually dictates the answer to the question here. In my
view, the “causal connection” between the forbidden conduct
and plaintiff ’s harm is, in certain key ways, more direct here
than it was in Holmes. In Holmes, the RICO plaintiff was a
surrogate for creditors of broker-dealers that went bankrupt
after losing money in stocks that had been overvalued due
to fraudulent statements made by the RICO defendant and
others. Put in terms of “proximate cause,” the plaintiff ’s
harm (an ordinary creditor loss) differed in kind from the
harm that the “predicate acts” (securities fraud) would ordi
narily cause (stock-related monetary losses). The harm was
“indirect” in the sense that it was entirely derivative of the
more direct harm the defendant’s actions had caused the
broker-dealers; and, there were several steps between the
violation and the harm (misrepresentation—broker-dealer
losses—broker-dealer business failure—ordinary creditor
loss). Here, however, the plaintiff alleges a harm (lost cus
tomers) that flows directly from the lower prices and the
opening of a new outlet—actions that were themselves alleg
edly caused by activity that Congress designed RICO to for
bid (conducting a business through a “pattern” of “predicate
acts” and investing in business funds derived from such a
“pattern”). In this sense, the causal links before us are
more “direct” than those in Holmes. See ante, at 464–465
(Thomas, J., concurring in part and dissenting in part).
Nonetheless, I agree with the majority that Holmes points
the way. That case makes clear that RICO contains impor
tant limitations on the scope of private rights of action. It
specifies that RICO does not provide a private right of action
“simply on showing that the defendant violated § 1962, the
plaintiff was injured, and the defendant’s violation was a ‘but
for’ cause of [the] plaintiff ’s injury.” 503 U. S., at 265–266

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(footnote omitted). Pointing out “the very unlikelihood that
Congress meant to allow all factually injured plaintiffs to
recover,” id., at 266 (emphasis added), Holmes concludes that
RICO imposes a requirement of “proximate cause,” a phrase
that “label[s] generically the judicial tools used to limit a per
son’s responsibility for the consequences of that person’s own
acts,” id., at 268. It recognizes that these tools seek to
discern “ ‘what justice demands, or . . . what is administra
tively possible and convenient.’ ” Ibid. (quoting W. Keeton,
D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on
Law of Torts § 41, p. 264 (5th ed. 1984)). It also explains
that “proximate cause” demands “directness,” while specify
ing that “directness” is only one of “the many shapes this
concept took at common law.” 503 U. S., at 268, 269. And
it points to antitrust law, both as a source of RICO’s treble
damages provisions and as an aid to their interpretation.
Ibid.
In my view, the “antitrust” nature of the treble-damages
provision’s source, taken together with both RICO’s basic
objectives and important administrative concerns, implies
that a cause is “indirect,” i. e., it is not a “proximate cause,”
if the causal chain from forbidden act to the injury caused a
competitor proceeds through a legitimate business’ ordinary
competitive activity. To use a physical metaphor, ordinary
competitive actions undertaken by the defendant competitor
cut the direct causal link between the plaintiff competitor’s
injuries and the forbidden acts.
The basic objective of antitrust law is to encourage the
competitive process. In particular, that law encourages
businesses to compete by offering lower prices, better prod
ucts, better methods of production, and better systems of
distribution. See, e. g., 1 P. Areeda & H. Hovenkamp, Anti
trust Law: An Analysis of Antitrust Principles and Their
Application ¶ 100a, pp. 3–4 (2d ed. 2000). As I shall explain,
these principles suggest that RICO does not permit private
action based solely upon this competitive type of harm, i. e.,

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harm a plaintiff suffers only because the defendant was able
to attract customers through normal competitive methods,
such as lower prices, better products, better methods of pro
duction, or better systems of distribution. In such cases,
the harm falls outside the limits that RICO’s private treble
damages provision’s “proximate-cause” requirement im
poses. In such cases the distance between the harm and
the predicate acts that funded (or otherwise enabled) such
ordinary competitive activity is too distant. The harm is
not “direct.”
At the same time, those principles suggest that other
types of competitive injuries not within their protective
ambit could lie within, not outside, “proximate-cause” limits.
Where, for example, a RICO defendant attracts customers
in ways that involve illegitimate competitive means, e. g., by
threatening violence, a claim may still lie. Claims involving
RICO violations that objectively target a particular competi
tor, e. g., bribing an official to harass a competitor, could also
be actionable.
Several considerations lead to this conclusion. First, I
have found no case (outside the Second Circuit, from which
this case arose) in which a court has authorized a private
treble-damages suit based upon no more than a legitimate
business’ ordinary procompetitive activity (even where fi
nanced by the proceeds of a RICO predicate act).
Second, an effort to bring harm caused by ordinary com
petitive activity within the scope of RICO’s private treble
damages action provision will raise serious problems of
administrability. Ante, at 458–460 (majority opinion); see
also Holmes, supra, at 269. To demonstrate that a defend
ant’s lower price caused a plaintiff to lose customers (or
profits) requires the plaintiff to show what would have hap
pened in its absence. Would customers have changed sup
pliers irrespective of the price change because of other dif
ferences in the suppliers? Would other competing firms
have lowered their prices? Would higher prices have at

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tracted new entry? Would demand for the industry’s prod
uct, or the geographic scope of the relevant market, have
changed? If so, how? To answer such questions based
upon actual market circumstances and to apportion damages
among the various competitors harmed is difficult even for
plaintiffs trying to trace harm caused by a defendants’ anti
competitive behavior. Associated Gen. Contractors of Cal.,
Inc. v. Carpenters, 459 U. S. 519, 542, 544 (1983) (the possibil
ity that harm “may have been produced by independent fac
tors” and “the danger of complex apportionment of damages”
weigh against finding the requisite causal connection in an
antitrust case). To answer such questions in the context of
better functioning markets, where prices typically reflect
competitive conditions, would likely prove yet more difficult.
Third, where other victims, say, victims of the underlying
RICO “predicate acts” are present, there is no pressing need
to provide such an action. Those alternative victims (here
the State of New York) typically “could be counted on to
bring suit for the law’s vindication.” Holmes, supra, at 273.
They could thus fulfill Congress’ aim in adopting the civil
remedy of “turn[ing victims] into prosecutors, ‘private attor
neys general,’ dedicated to eliminating racketeering activ
ity.” Rotella v. Wood, 528 U. S. 549, 557 (2000) (citing Klehr
v. A. O. Smith Corp., 521 U. S. 179, 187 (1997)).
Fourth, this approach to proximate cause would retain pri
vate actions aimed at the heart of Congress’ relevant RICO
concerns. RICO’s sponsors, in reporting their underlying
reasons for supporting RICO, emphasized, not the fair, ordi
nary competition that an infiltrated business might offer its
competitors, but the risk that such a business would act cor
ruptly, exercising unfair methods of competition. S. Rep.
No. 91–617, pp. 76–78 (1969); see also Cedric Kushner Pro
motions, Ltd. v. King, 533 U. S. 158, 165 (2001). RICO fo
cuses upon the “infiltration of legitimate business by orga
nized crime,” in significant part because, when “ ‘organized
crime moves into a business, it brings all the techniques of

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violence and intimidation which it used in its illegal busi
nesses.’ ” Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479,
517, 515 (1985) (Marshall, J., dissenting) (quoting 113 Cong.
Rec. 17999 (1967)).
My approach would not rule out private actions in such
cases. Nor would it rule out three of the four suits men
tioned by Justice Marshall, dissenting in Sedima, when he
describes RICO’s objectives. It would not rule out lawsuits
by injured competitors or legitimate investors if a racketeer,
“uses ‘[t]hreats, arson and assault . . . to force competitors
out of business’ ”; “uses arson and threats to induce honest
businessmen to pay protection money, or to purchase certain
goods, or to hire certain workers”; or “displace[s]” an “honest
investor” when he “infiltrates and obtains control of a legiti
mate business . . . through fraud” or the like. 473 U. S., at
521, 522.
I concede that the approach would rule out a competitor’s
lawsuit based on no more than an “infiltrated enterprise”
operating a legitimate business to a businessman’s competi
tive disadvantage because unlawful predicate acts helped
that legitimate business build a “strong economic base.”
And I recognize that this latter kind of suit at least arguably
would have provided helpful deterrence had the view of Se
dima’s dissenting Justices prevailed. Id., at 500–523 (Mar
shall, J., dissenting) (arguing that RICO’s private action pro
vision did not authorize suits based on harm flowing directly
from predicate acts); id., at 523–530 (Powell, J., dissenting)
(same). But the dissent did not prevail, and the need for
deterrence consequently offers only weakened support for
a reading of RICO that authorizes private suits in this
category.
Fifth, without this limitation, RICO enforcement and basic
antitrust policy could well collide. Firms losing the compet
itive battle might find bases for a RICO attack on their more
successful competitors in claimed misrepresentations or even
comparatively minor misdeeds by that competitor. Firms

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486 ANZA v. IDEAL STEEL SUPPLY CORP.
Opinion of Breyer, J.
that fear such treble-damages suits might hesitate to com
pete vigorously, particularly in concentrated industries
where harm to a competitor is more easily traced but where
the consumer’s need for vigorous competition is particularly
strong. The ultimate victim of any such tendency to pull
ordinary competitive punches of course would be not the
competing business, but the consumer. Although Congress
did not intend its RICO treble-damages provision as a simple
copy of the antitrust laws’ similar remedies, see, e. g., Se
dima, supra, at 498–499, there is no sound reason to interpret
RICO’s treble-damages provision as if Congress intended to
set it and its antitrust counterpart at cross-purposes.
For these reasons, I would read into the private treble
damages provision a “proximate-cause” limitation that places
outside the provision harms that are traceable to an unlawful
act only through a form of legitimate competitive activity.
III
Applying this approach to the present case, I would hold
that neither of Ideal’s counts states a RICO private treble
damages claim. National is a legitimate business. Another
private plaintiff (the State of New York) is available. The
question is whether Ideal asserts a harm caused directly by
something other than ordinary competitive activity, i. e.,
lower prices, a better product, a better distribution system,
or a better production method.
Ideal’s second count claims injury caused by National’s (1)
having taken customers (2) attracted by its new store (3)
that it financed in part through profits generated by the tax
fraud scheme, and the financing is the relevant violation.
§ 1962(a). The opening of a distribution outlet is a legiti
mate competitive activity. It benefits the firm that opens it
by making it more convenient for customers to purchase
from that supplier. That ordinary competitive process is all
the complaint describes. And for the reasons I have given

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in Part II, supra, I believe that the financing of a new
store—even with funds generated by unlawful activities—is
not sufficient to create a private cause of action as long as the
activity funded amounts to legitimate competitive activity.
Ideal must look for other remedies, e. g., bringing the facts
to the attention of the United States Attorney or the State
of New York.
Ideal’s first count presents a more difficult question. It
alleges that National filed false sales tax returns to the State
of New York. As an action indictable under the federal mail
fraud statute, that action is a predicate act under RICO.
See § 1961(1) (2000 ed., Supp. III). National passed these
savings on to its cash customers by not charging them sales
tax, thereby attracting more cash customers than it would
have without the scheme. Is this a form of injury caused,
not by ordinary competitive activity, but simply by the predi
cate act itself?
In my view, the answer to this question is “no.” The com
plaint alleges predicate acts that amount simply to the facts
that National did not “charge” or “pay” sales taxes or accu
rately “report” sales figures to the State. National did not
tell its customers, “We shall not pay sales taxes.” Rather,
it simply charged the customer a lower price, say, $100 rather
than $100 plus $8 tax. Consider a retailer who advertises
to the customer a $100 table and adds, “We pay all sales
taxes.” Such a retailer is telling the customer that he will
charge the customer a lower price by the amount of the tax,
i. e., about $92. The retailer implies that he, the retailer,
will pay the tax to the State, taking the requisite amount
owed to the State from the $100 the customer paid for the
item.
The defendants here have done no more. They have in
effect cut the price of the item by the amount of the sales
tax and then kept the money instead of passing it on to the
State. They funded the price cut from the savings, but the

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source of the savings is, in my view, beside the point as long
as the price cut itself is legitimate. I can find nothing in the
complaint that suggests it is not.
For these reasons, I would reverse the decision of the
Court of Appeals on both counts.