Torres v. SGE Management, LLC

This case was brought as a class action under the Racketeer Influenced and Corrupt Organizations Act (RICO) by sellers for a retailer who contend that the retailer’s business is an illegal pyramid scheme. The district court certified a class, but a divided Fifth Circuit panel decertified it, holding that individualized issues of reliance defeated Rule 23’s predominance requirement.  The Fifth Circuit granted en banc review, and we filed an amicus brief in support of the plaintiffs.  Our brief explained that where a plaintiff alleges that a  defendant’s business is an illegal pyramid scheme, proof of reliance on the defendant’s misrepresentations is not necessary because the scheme would not have existed at all absent the misrepresentation of legitimacy, and that, in any event, the court could reasonably infer on a class-wide basis that class members relied on the misrepresentation that the defendants’ business was legitimate. The en banc court agreed with us that individualized issues of causation would not predominate and affirmed the district court’s class certification.