In a case of first impression, the court of appeals for the 2nd Circuit affirmed the dismissal of a plaintiff investment company’s civil RICO claim against JPMorgan Chase & Co. (JPMC) for allegedly aiding and abetting Bernard L. Madoff Investment Securities (Madoff) in securities fraud. (MLSMK Investment Company v. JPMorgan Chase & Company, No. 10-3040-cv.) The decision resolves a split in the district courts regarding the scope of the RICO Amendment, extending the federal ban on civil RICO claims based on securities fraud to cover the “aiding and abetting” of such frauds, thereby preventing plaintiffs from collecting RICO’s award of treble damages.
The decision should be welcomed with open arms. The plaintiff asserted New York state-law claims against JPMorgan, including aiding and abetting Madoff’s breach of fiduciary duty, commercial bad faith and negligence. The 2nd Circuit had affirmed the district court’s dismissal of plaintiff’s state-law claims, focusing instead on plaintiff’s federal claim for violations of the RICO statute.