Duane Morris Class Action Review - 2023 - Report - Page 301
In Earl, et al. v. The Boeing Co., No. 20-40720 (5th Cir. Nov. 21, 2022), the plaintiffs, a
group of airline ticket purchaser, filed several class actions alleging that the defendant
Boeing violated the RICO by artificially colluding with the defendant Southwest Airlines
and inflating ticket prices following cancelled flights related to faulty 737 Max aircrafts.
The district court granted the plaintiffs’ motion for class certification. On appeal, the Fifth
Circuit vacated the district court’s ruling. The district court had granted the plaintiffs'
request to certify two classes, including: (i) customers who bought Southwest Airlines
tickets; and (ii) customers who bought tickets from American Airlines. The two classes
were then divided into class members who bought plane tickets, and those who were
later reimbursed for the purchases. The defendants argued that the classes lacked
commonality and would require overwhelmingly individualized inquiries to determine
which class members belonged to each class. The plaintiffs specifically contended that
the defendants fraudulently concealed defects in the aircrafts, which threatened
passengers with serious injury or death. The Fifth Circuit concluded that the plaintiffs
failed to plausibly allege that they suffered a concrete injury sufficient to confer standing.
The Fifth Circuit ruled that the plaintiffs failed to allege any “plausible theory of
economic harm” because there was no physical injury to which they were allegedly
exposed because of the defendants’ alleged fraud. Id. at 8-9. For these reasons, the
Fifth Circuit vacated the district court’s ruling granting the plaintiffs’ motion for class
certification and remanded with instructions to dismiss for lack of jurisdiction.
H.
Rulings Finding RICO Class Claims Frivolous
Allegations in RICO class actions typically advance substantial and serious allegations
of fraud. When those allegations are not proved, motions for sanctions are not
uncommon.
In 2022, the court in Squitieri, et al. v. Nocco, 2022 U.S. Dist. LEXIS 71183 (M.D. Fla.
Apr. 18, 2022), addressed this issue. In Squitieri, the plaintiffs filed a RICO class action.
The defendants opposed Plaintiffs' motion for class certification and moved to dismiss,
and for Rule 11 sanctions against the plaintiffs for filing a second amended complaint.
After the defendants moved for sanctions, the court dismissed the complaint as a
shotgun pleading and reserved ruling on the sanctions motion. The plaintiffs
subsequently filed a third amended complaint that sought RICO damages and the
defendants again moved to dismiss and for Rule 11 sanctions. The court determined
that as the complaint suffered from an impermissible joinder of parties, it severed the
action and required all but one of the plaintiffs to file complaints in separate actions. The
court dismissed with prejudice the complaints in all eight subsequently filed cases. The
defendants then moved for sanctions in each case for filing frivolous complaints. The
court agreed that the complaints were either objectively frivolous shotgun pleadings or
failed to state claims for relief. The court noted that the complaint failed to plausibly
allege the first element of a civil RICO claim, i.e., a pattern of predicate criminal acts by
the defendant that “pose a threat of continued criminal activity.” Id. at *9. The court
further determined that the plaintiffs' counsel should have known, after a reasonable
investigation into the law, that styling the plaintiffs’ claims as injuries from RICO
violations was an effort that “had no reasonable chance of success.” Id. The court found
that the plaintiffs’ counsel should have known the claims were frivolous, and
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Duane Morris Class Action Review – 2023
