Commercial Law Reporter
A Publication Devoted to Commercial Law and Intellectual Property Issues
March 2011

Managing Editor: Karen Libertiny Ludden
Co-Editors: Robert D. Goldstein and Mark Shreve

• When a RICO claim comes calling.
• What you need to know about… the appeals process
for property taxes.
• Commercial law update: Federal Court denies
motion to dismiss without prejudice in trademark
infringement case.

When a RICO claim comes calling
by: Karen Libertiny Ludden

Many of us associate the Racketeer Influenced and Corrupt Organizations Act (“RICO”) with
organized crime. However, in the world of commercial litigation, a RICO claim is increasingly seen added on
at the end of a breach of contract claim on the grounds that improper activity was conducted using the U.S.
mail system, and thus RICO, with its potential for treble damages, is an additional count. With the recent United States Supreme Court decision in Boyle v. United States, 129 S.Ct. 2237 (2009) – broadening the
definition of the term “enterprise” necessary to activate a RICO claim – RICO adjunct claims are on the rise.
What is a business to do when a contract dispute turns into a RICO claim?
The RICO statute was made purposefully vague so that it could be used as a tool to prosecute organized
crime activities. Under RICO, it is unlawful for “any person employed or associated with any enterprise
engaged in, or the activities which affect, interstate or foreign commerce, to conduct or
participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of
racketeering activity.” 18 U.S.C. 1962 ( c). To sustain a RICO violation claim, a plaintiff
must show: (1) two or more predicate offenses; (2) the existence of an enterprise;
(3) a nexus between the pattern of racketeering and the enterprise; and
(4) an injury caused by the other three factors. VanDenBroeck v CommonPoint Mortg. Co., 210 F.3d 696, 699 (6th Cir. 2001).
Ordinarily, a plaintiff in a breach of contract case will allege that the two predicate offenses were mail
and/or wire fraud, and proceed to generally proclaim that there existed a proper “enterprise” and pattern of
racketeering. The recent Boyle decision emboldened these plaintiffs by broadening the definition of
“enterprise” to include even informal associations and those that do not necessarily maintain a hierarchical
structure or chain of command, fixed roles, a name, regular meetings, dues,
established rules and regulations, disciplinary procedures or induction ceremonies;
the criteria that traditionally defined an “enterprise” under RICO. Boyle, supra.
This does not, however, mean that every breach of contract claim will support a RICO claim as well.
For one thing, an allegation of common law fraud is not sufficient to establish a RICO claim. German Free
State of Bavaria v Toyobo Co, Ltd, 480 F.Supp.2d 958 (W.D. Mich. 2007). “Simply conspiring to commit a
fraud is not enough to trigger the Act if the parties are not organized in a fashion that would enable them to
function as a racketeering organization for other purpoes.” VanDenBroeck, supra at 700.
With regard to the two predicate acts, they must be related, and they have to pose a threat of continued
criminal activity. American Eagle Credit Corp. v. Gaskins, 920 F.2d 352 (6th Cir. 1990). Both the
Supreme Court and the Sixth Circuit have held that “predicate acts extending over a few weeks or months
and threatening no future criminal conduct do not satisfy this requirement; Congress was concerned in
RICO with long term criminal conduct.” Id, citing H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229
(1989). Likewise, the RICO “enterprise” must be separate from the RICO person.
In other words, “A RICO enterprise cannot merely consist of the named defendants.” Durant v. ServiceMaster Co., 159 F.Supp. 2d 977 (E.D. Mich. 2001). Importantly, RICO requires
a “showing that the defendants conducted or participated in the conduct of the ‘enterprise’s affairs,’
not just their own affairs.” Reves v. Ernst & Young, 507 U.S. 170, 179 (1990) (emphasis in original).
In short, while one element of a RICO claim was broadened by the Boyle decision, all the other
criteria must still be met. A defendant in a commercial breach of contract case facing a
RICO claim should not wait in fear but instead force the plaintiff to specify the
illegal acts – as is required by law for any allegation of fraud – and proceed to file a dispositive motion striking
such claims if they are unsupported.
Ms. Ludden is an attorney in the Troy office of Garan Lucow Miller who handles
complex commercial litigation cases. You can reach her by telephone,
at(248)6417600/(800)875-7600, or kludden@garanlucow.com

What you need to know about… the
appeals process for property taxes
by: Thomas P. Christy

The season for property tax appeals is here. Many property owners are now asserting that their
property has been overvalued for tax purposes. The forums for these disputes are the local board of review
and the Michigan Tax Tribunal.
Under Michigan property tax law, three values are relevant: the fair market value (FMV), the state
equalized value (SEV), and the taxable value. The municipal assessor’s job is to determine the SEV, which
is supposed to equal half of the FMV. Thus, if the property’s FMV is $100,000, the SEV should be
$50,000.
The taxable value starts out as equal to the SEV. While the property remains under the same
ownership, a property’s taxable value cannot increase more than 5%, or the rate
of inflation each year, whichever is less. Therefore, the “capped” taxable value
may be significantly less than the SEV. The assessor determines the SEV for a property
for a given tax year based on the property’s FMV as of December 31 of the previous year, i.e., the SEV for the 2011 tax year should be half of the property’s FMV on December 31, 2010.
The assessor will usually send his determination of the SEV to the taxpayer during
February. The first opportunity to challenge the assessor’s determination is the local board of review,
which is supposed to meet on the second Monday in March, although most municipalities use a different date during March. Local municipalities are allowed to establish additional procedural requirements.
An appearance at the local board of review is mandatory for residential property. For commercial
property, the taxpayer may appeal most cases directly to the Michigan Tax Tribunal.
Although the local board of review is optional for commercial properties, the
local board is usually a worthwhile step because the procedure is less formal and less expensive.
In clear cut cases, appeals can sometimes be favorably resolved at the local board of review.
On the other hand, proceedings at the Michigan Tax Tribunal are very
formal, just like a proceeding in a civil court, with full blown trials and rigid rules of evidence.
Appeals directly to the Michigan Tax Tribunal, must be filed by May 31.
An intermediate step exists between the local board of review and the Michigan Tax Tribunal, known
as the State Tax Commission, for cases where the property’s classification (i.e. commercial vs.
residential) or boundary lines are in dispute. If only the valuation is
at issue, this step does not apply. The deadline for commercial appeals to the Tax
Tribunal is May 31. If a property owner has pursued an appeal at the local board of review, the decision is not due until June. Therefore, the property owner may need to file an appeal at the Tax Tribunal before knowing the outcome at the local board of review. The property owner can then withdraw the Tax Tribunal appeal if the local appeal is favorable. Regardless what path the property owner takes
to the Michigan Tax Tribunal, the Tribunal’s decisions may be appealed to the Michigan Court of Appeals,
which is Michigan’s general civil appellate court. Such expense is usually justified only if the dispute is large
and the property owner intends to hold the property for a long period of time.
Although the local board of review and the Michigan Tax Tribunal can consider evidence from real
estate brokers and other persons concerning a property’s value, the greatest weight is given to a licensed
appraiser’s opinion.
Mr. Christy is an attorney in the Troy office who handles transactional and real
estate law. You can reach him at (248) 6 4 1 – 7 6 0 0 / ( 8 0 0 ) 875-7600 or
tchristy@garanlucow.com

Commercial Law Update
by Karen Libertiny Ludden
FEDERAL COURT DENIES WITHOUT
PREJUDICE DEFENDANTS’ MOTION TO
DISMISS TRADEMARK INFRINGEMENT CASE

On March 4, 2011, Judge Victoria Roberts of the Eastern District of Michigan denied without prejudice
the Defendants’ Motion to Dismiss and for Summary Judgment in a trademark infringement case involving the
use of the “Salon Selective” name for hair care products. CTI Logistics v. River West Brands, 2001 WL
833802 (E.D. Mich.). Arguing not that there would be no confusion in the use of this brand name, but rather
that Defendants obtained an oral license to use the marks from one of Plaintiff’s predecessors-in-interest,
Defendants sought to dismiss the case. Denying Plaintiff’s Motion to Stay, Judge
Roberts held that there was insufficient argument and evidence to support Defendants’ License Defense
because, “unless a licensor explicitly grants its licensee the right to sublicense
the licensed mark, any putative sub-license is invalid as a matter of law.” The Court held, inter
alia, that Defendants had not explained how it had acquired its interest in the mark.
The Court likewise held, however, that Plaintiffs did not carry their burden of proof in
seeking a preliminary injunction on the issue of ownership.

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SAVE THE DATE
GARAN LUCOW MILLER
GRAND RAPIDS SPRING BREAKFAST SEMINAR
April 13, 2011
Frederik Meijer Gardens and Sculpture Park

Topics include:
•The Three Phases of Surveillance
•Premises Liability Update
•Adjusters and Their Estate Planning
•Coverage Issues
If your company is interested in receiving a free inhouse
seminar on any commercial law topic, please
contact kludden@garanlucow.com