Commercial: RICO and fraud claims in kickback scheme are reinstated

Where Amazon showed it paid more in lease and direct-purchase real estate transactions than it would have absent a kickback scheme, the district court wrongly dismissed its claims under the Racketeer Influenced and Corrupt Organizations Act; its claims of fraud, unjust enrichment and conversion and part of its civil conspiracy claim.

Background

Amazon.com Inc. and Amazon Data Services Inc. sued two former employees, a real estate developer and related individuals and entities, alleging an extensive kickback scheme connected to real property transactions in Northern Virginia. The district court granted summary judgment for the defendants on Amazon’s claim under the Racketeer Influenced and Corrupt Organizations, or RICO, Act; its claims of fraud, unjust enrichment and conversion and part of its civil conspiracy claim.

RICO

The district court concluded there could be no RICO enterprise because the facts “merely support a ‘hub and spoke’ or ‘rimless wheel’ structure to the alleged kickback scheme,” which it considered a “dispositive” flaw. The district court’s assessment is problematic both legally and factually.

As a legal matter, traditional conspiracy law is not a sure guide for ascertaining the outer limit of what qualifies as a RICO association-in-fact enterprise. As a factual matter, the district court overlooked the connections among the defendants across multiple transactions, from which a reasonable jury could infer an association-in-fact enterprise. Further Amazon’s evidence suffices to demonstrate a genuine dispute of material fact regarding the existence and contours of the alleged enterprise.

The district court also reasoned that Amazon could not prove “that the kickback payments . . . led to increased costs to Amazon on the lease transactions or the direct purchase transactions” because Amazon did not produce evidence “establishing the market value of the properties at the time of the lease and direct purchase transactions.” But Amazon produced the report of its expert witness, Richard Lee, who opines, based on evidence in the record, that Amazon paid more in the lease and direct-purchase transactions than it would have absent the kickback scheme. Summary judgment, therefore, was not appropriate.

Fraud

The district court considered it “fatal to [Amazon’s] fraud claim” that the company failed “to put forth any evidence concerning the [market] value of the properties at the time each transaction closed.” Relying on cases about undisclosed defects in property, the district court held that the only proper measure of damages was “‘the difference between the actual value of the property at the time the contract was made and the value that the property would have possessed had the [fraudulent] representation been true.’”

Those cases are inapposite because Amazon does not allege defects in the data center properties but, rather, undisclosed kickbacks in the contracts that allegedly increased Amazon’s purchase prices and rent payments. As previously explained, Amazon has produced evidence creating a genuine dispute about whether it paid more for the properties than it would have paid “had the alleged fraud not been committed.” That suffices under Virginia law.

Quasi-contractual claims

The possibility that Amazon might win damages at trial does not defeat the pre-trial viability of its equitable claims. Amazon is entitled to pursue legal and equitable remedies in the alternative. Second, the affirmed leases do not foreclose Amazon’s unjust enrichment claim. “Amazon’s unjust enrichment claims are not confined to the contracts governing the lease agreements” but instead “take aim at Northstar’s broader scheme to acquire Amazon’s business and thereby generate illicit profits.”

Civil conspiracy

The court granted summary judgment in attorney Rodney Atherton’s favor on this claim, reasoning that he could not have conspired with Amazon employees Casey Kirschner and Carleton Nelson because he “was acting in a representative capacity when he created corporate entities and trusts for [their] benefit” and “there is no evidence” that he “formed an agreement with the Watson Defendants to interfere with Amazon’s employment relationships” with Nelson and Kirschner. This court again disagrees.

Evidence in the record creates a genuine dispute about two material facts: whether Atherton conspired with third parties who were not his clients, and whether Atherton was acting within the scope of the legal representation when he created the corporate entities and trusts for Nelson and Kirschner.

Reversed and remanded.

Amazon.com Inc. v. WDC Holdings LLC, Case No. 23-1991, Sept. 16, 2025. 4th Cir. (Rushing), from EDVA at Alexandria (Alston). Thomas G. Hungar for Appellants. Kian James Hudson and Julie Smith Palmer for Appellees. VLW 025-2-370. 25 pp.