Hemi Group, LLC v. City of New York, New York

Summary

The Supreme Court held that New York City cannot state a civil RICO claim against online cigarette seller Hemi Group because it cannot show its lost tax revenue came about 'by reason of' the alleged predicate mail and wire fraud, namely Hemi's failure to file Jenkins Act customer reports with New York State. Applying the direct-relationship requirement, the Court reasoned that the customers' independent failures to pay taxes they legally owed—not Hemi's fraud—directly caused the City's harm, putting the City's theory well beyond the 'first step' the law ordinarily does not pass and stretching RICO's causal chain farther than ever before. The Court declined to decide whether lost tax revenue is an injury to 'business or property,' rejected the City's attempt to recast the violation as a broad 'systematic scheme,' and refused to consider the City's newly advanced theory that Hemi's affirmative misrepresentations to customers were predicate acts, because the City had disavowed that theory below. Justice Ginsburg concurred in part and in the judgment on the narrower ground that the City is using RICO to end-run Commerce Clause limits and the Jenkins Act's limited remedies, while Justice Breyer, joined by Justices Stevens and Kennedy, dissented, arguing the harm was foreseeable, intended, and squarely within the risks the Jenkins Act seeks to prevent.