Fairfax Lawsuit

[watsa_is_a_randian_hero]

I came across this today from Katten Muchin - see attached.  This is a ruling on another shareholder suit alleging racketeering activity.

 

Single Scheme Did Not Constitute Pattern of Racketeering Activity

 

An individual investor in, as well as the corporate manager of, a Provincetown, Massachusetts, resort brought an action alleging, among other things, violations of federal and state RICO statutes against several other investors in the resort. The claims arose out of a series of disputes involving the ownership of the resort, as well as a string of settlement agreements whereby the defendants ultimately agreed to sell their interests in the resort to the individual plaintiff. The sale was never consummated, however, because the individual plaintiff was unable to obtain financing to complete the purchase, allegedly due to the defendants’ wrongful interference with a senior lender that had to consent to the financing.

 

The District Court dismissed the complaint and the plaintiff appealed. On appeal, the 11th Circuit began its analysis by recognizing that an essential element of any RICO claim is a “pattern of racketeering activity” that must “amount to, or... otherwise constitute a threat of, continuing racketeering activity.” The court pointed out that this requirement can be met through either “closed-ended” or “open-ended” continuity. Close-ended continuity can be established by a series of related predicate acts of racketeering occurring over a significant period of time, while open-ended continuity may be demonstrated through a showing that the acts were part of a “regular way of doing business” or were likely to be repeated in the future.

 

In affirming the dismissal of the complaint, the 11th Circuit held that the allegations could not establish closed-ended continuity because the alleged acts were part of a single scheme, occurring over a relatively short two-year time period, and involved only two purported victims. Similarly, the court explained that the alleged wrongdoing was not part of defendants’ regular way of doing business since the allegations related to the “extraordinary act of transferring ownership interests” in the resort. In addition, because the allegations were predicated on a single scheme to drive plaintiffs from the resort’s management, there was no threat of the acts being repeated. (Ferrell v. Durbin, No. 07-14878, 2009 WL 322049 (11th Cir. Feb. 9, 2009))

[FlyingArrow]

I would suggest that those definitions support FFH's case against the hedgies.