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HEMI GROUP, LLC, and KAIL GACHUPIN, Petitioners, V. CITY OF NEW YORK, Respondent. PETITIONERS' REPLY BRIEF (PDF) 

The City of New York's brief in opposition fails to confront the central issue presented by the divided court of appeals decision in this case: Whether government has standing under the Racketeer Influenced and Corrupt Organizations Act to seek recovery for non commercial injury. Unable to deny that a split in the circuits exists on this important issue, and ignoring this Court's interpretation of "business or property" under the Clayton Act (from which Congress adopted the term in the RICO statute), the City instead distorts the pertinent case law in an attempt to show that the Second Circuit panel's decision does not conflict with decisions in other circuits. The City does not contest that a uniform, national answer to this question is of vital importance, and instead merely argues that a writ of certiorari should not issue because of the City's desire to collect taxes (trebled under RICO) from parties who never owed the taxes to begin with.

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HEMI GROUP, LLC, and KM GACHUPIN, Petitioners, V. CITY OF NEW YORK, Respondent. PETITION FOR WRIT OF CERTIORARI (PDF) 

REASONS FOR GRANTING THE PETITION

Petitioners respectfully submit that there are two reasons why this Court should grant their petition for writ of certiorari and review the Second Circuit Court of Appeal's decision. First, as the Second Circuit and other courts have recognized, there is a distinct split of opinion among the circuit courts of appeal as to whether state and local governments can use RICO in federal district courts to collect taxes and similar non commercial losses. Second, the ruling by the Second Circuit Court of Appeal's conflicts with this Court's precedent requiring a party to suffer a direct injury to have RICO standing.

I. THE CIRCUITS ARE SPLIT.

Standing to bring a civil RICO claim is specifically limited to "[a]ny person injured in his business or property" 18 U.S.C. ¤ 1964(c) (App. E, 179a-180a); Sedima v. Imrex Co., 473 U.S. 479, 496 (1985)("the plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property"); Canyon County v. Syngenta Seeds, Inc., 519 F.3d 969 (9th Cir. 2008) (same), cert. denied, 129 S.Ct. 458 (2008). In determining whether this standing requirement is met, there is an acknowledged split among the Circuits on whether losses suffered by government acting in its sovereign capacity are injuries to "business or property." . . .

II. THE SECOND CIRCUIT COURT OF APPEAL'S DECISION CONFLICTS WITH SUPREME COURT PRECEDENT.

A. Supreme Court Precedent Limits RICO Standing To Directly Injured Parties.

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HEMI GROUP, LLC, and HAl GACHUPIN, Petitioners, - V. - CITY OF NEW YORK, Respondent: BRIEF IN OPPOSITION TO PETITION (PDF) 

QUESTION PRESENTED

Does State government and its subdivisions have standing under RICO because lost tax revenue may constitute an injury to "business or property" in accord with the statute and relevant authority? . . .

Respondent, the City of New York ("the City"), brought four civil actions under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. ¤ 1961 et seq. ('RICO"), against various defendant out-of-state cigarette retailers, including the instant petitioners, the Hemi Group and Kai Gachupin ("petitioners"). The City alleges that petitioners actively schemed to defraud the City of tax revenues through the sale of cigarettes to City residents over the Internet. By refusing to report purchases by City residents as required under the Jenkins Act, see 15 U.S.C. ¤ 375 et seq., and advertising that concealment and representing the cigarettes as "tax-free," petitioners commit mail and wire fraud, see 18 U.S.C. ¤ 1341, 1343. As a result, the City is unable to collect use taxes owed on the sales and petitioners have thus injured the City of New York through lost tax revenues. . . .

The City alleges that petitioners: (1) advertise their cigarettes over the Internet to City residents, (2) ship the orders by common carrier or the United States Postal Service into New York City, and (3) refuse to comply with the Jenkins Act registration or reporting requirements (10a). The City further alleges that petitioners' failure to comply with the Jenkins Act is an essential part of their business model because the savings that customers obtain from buying the cigarettes online are almost entirely attributable to the fact that the New York State and City taxes are not included in the cigarettes' sales price (lOa).

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