Actual Knowledge, Imputed Corporate Awareness, and the “Single Scheme” Limitation on Civil RICO: A Commentary on Salamey v. Salami (Carter-Jones/Carter Lumber)

I. Introduction

The Sixth Circuit’s unpublished decision in Nabil Salamey v. Houssam Salami (with Carter-Jones Companies, Inc. d/b/a Carter Lumber as the relevant appellee) sits at the intersection of state statutory conversion law and federal civil RICO. While marked “NOT RECOMMENDED FOR PUBLICATION,” the opinion offers a clear restatement and application of two important legal constraints:

Under Michigan’s statutory conversion statute, liability for “aiding in conversion” by a third party requires actual knowledge of the underlying conversion; constructive or imputed “institutional” knowledge is not enough, and an employee’s knowledge is not automatically attributed to the corporation.
Under civil RICO, a single, finite scheme targeting a single victim—here, a homeowner pair whose construction funds were allegedly misused—does not satisfy the “pattern of racketeering activity” requirement, reinforcing the Sixth Circuit’s long-standing skepticism toward “one business dispute as RICO” theories.

The case arises from a residential construction project gone awry, raising claims against a builder (Houssam Salami and his company, SS Designs) and a material supplier (Carter Lumber). Only the claims against Carter Lumber are before the Sixth Circuit on this appeal. The court affirms summary judgment for Carter Lumber on both the Michigan statutory conversion claim and the civil RICO claim.

II. Factual and Procedural Background

A. The parties and their relationships

Nabil and Sonia Salamey (the plaintiffs-appellants) engaged builder Houssam Salami and his company, SS Designs, LLC, to construct a home in Canton, Michigan. Importantly:

There was no written contract; the arrangement was oral.
Nabil opened a credit union account dedicated to the project and authorized Salami to withdraw funds to pay construction costs.

Meanwhile, Salami had a dual role with Carter Lumber:

He was an outside sales representative employed by Carter Lumber.
His company, SS Designs, was a customer of Carter Lumber with a credit account for building materials.

SS Designs used that credit account for multiple construction projects, including (but not limited to) the Salameys’ home.

B. The disputed application of construction funds

Carter Lumber’s credit account operation with SS Designs worked as follows:

SS Designs could purchase materials on credit for different projects.
When making payments, Salami typically specified the project/invoice to which a payment should be applied.
If he did not specify, Carter Lumber’s default policy was to apply payments to the oldest open invoice on the account.

Some payments ultimately made to Carter Lumber came from the credit union account established by the Salameys. The plaintiffs contended that these funds were earmarked exclusively for their home, yet Carter Lumber’s application policy meant some of those funds were used to satisfy SS Designs’ debts on other projects. From the homeowners’ perspective, this amounted to a misuse—or “conversion”—of their property (money).

C. Litigation history

The dispute began in Michigan state court but was removed to federal court (Eastern District of Michigan) by Carter Lumber. The plaintiffs sued:

Salami and SS Designs (the builder side), and
Carter Lumber (the supplier) and others.

Against Carter Lumber, the plaintiffs raised two principal claims:

Michigan Statutory Conversion: alleging Carter Lumber “aided in” Salami’s conversion of their funds, under Mich. Comp. Laws § 600.2919a(1)(b).
Civil RICO: alleging Carter Lumber participated in a racketeering enterprise violating 18 U.S.C. § 1962(c).

Carter Lumber moved for summary judgment on both claims and prevailed. The district court:

Granted summary judgment for Carter Lumber on the conversion and RICO claims.
Also granted summary judgment for Salami and SS Designs on RICO, and then remanded the remaining state-law claims against them.
A separate appeal involving Salami and SS Designs was later dismissed by stipulation and is irrelevant to this opinion.

The appeal before the Sixth Circuit thus concerns only whether summary judgment in favor of Carter Lumber on (1) statutory conversion and (2) RICO was correct.

III. Summary of the Sixth Circuit’s Opinion

The Sixth Circuit (Judge Larsen, joined by Judges Clay and Kethledge) reviews the summary judgment decision de novo and affirms.

A. Statutory conversion (Michigan law)

Under Michigan’s statutory conversion statute, a third party (like Carter Lumber) is liable only if it:

buys, receives, possesses, conceals, or aids in the concealment of stolen, embezzled, or converted property when [it] knew that the property was stolen, embezzled, or converted.
—Mich. Comp. Laws § 600.2919a(1)(b) (emphasis added)

Relying on Echelon Homes, L.L.C. v. Carter Lumber Co., 694 N.W.2d 544 (Mich. 2005), the court emphasizes that:

Actual knowledge is required.
Constructive knowledge (what a reasonable person should know) is not enough.

The court concludes that Carter Lumber had no actual knowledge of any conversion because:

Salami was expressly authorized by the plaintiffs to withdraw funds from the credit union account.
The checks sent to Carter Lumber listed Salami as an owner/authorized signer on the account.
The record lacked evidence that Carter Lumber knew of any limitations on Salami’s authority (for example, that funds could only be used for this particular house).

The plaintiffs tried to bridge this gap by arguing that, because Salami was a Carter Lumber employee, the company had “institutional knowledge” of his wrongdoing. The court rejects that, citing Travis v. Dreis & Krump Mfg. Co., 551 N.W.2d 132 (Mich. 1996), which ties corporate “actual knowledge” to that possessed by a supervisory or managerial employee. Salami was not a supervisor or manager at Carter Lumber, so his knowledge is not imputed to the company for purposes of statutory conversion. Without proof of Carter Lumber’s actual knowledge, the conversion claim fails as a matter of law.

B. Civil RICO (18 U.S.C. § 1962(c))

Civil RICO requires proof of:

(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. —Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)

The district court held the plaintiffs failed to show a RICO “enterprise” distinct from the “person” (Carter Lumber). On appeal, plaintiffs argued that Salami was the distinct RICO “person” who operated the enterprise.

The Sixth Circuit bypasses the enterprise/person issue and instead affirms on an independent ground: the plaintiffs failed to establish a pattern of racketeering activity. Relying on Moon v. Harrison Piping Supply, 465 F.3d 719 (6th Cir. 2006), and H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (1989), the court stresses that:

At least two predicate acts within ten years are necessary but not sufficient to show a pattern.
A pattern requires a relationship among predicate acts and a threat of continued criminal activity (“continuity”).

Assuming (for the sake of argument) that misapplication of the plaintiffs’ funds might amount to bank, wire, or mail fraud (RICO “predicate acts”), the court holds there is no pattern:

The evidence suggests at most a single scheme, involving:

one set of funds (the plaintiffs’ credit union account)
one “operation” (applying those funds to SS Designs’ other debts)
and a single victim (the Salameys).

There is no indication of multiple schemes, multiple victims, or ongoing racketeering beyond this discrete dispute.

Citing Moon and Bachi-Reffitt v. Reffitt, 802 F. App’x 913 (6th Cir. 2020), the court concludes that such a single, time-limited scheme targeting one victim does not exhibit the kind of continuity or scope RICO demands. Consequently, the RICO claim fails for lack of a pattern, regardless of any enterprise/person distinctness issues.

IV. Detailed Analysis

A. The Michigan statutory conversion claim

1. Statutory framework: Mich. Comp. Laws § 600.2919a(1)(b)

Michigan’s statutory conversion statute creates a civil remedy for certain dealings in property known to be wrongfully obtained. The relevant subsection allows an aggrieved party to sue a person who:

buys, receives, possesses, conceals, or aids in the concealment of stolen, embezzled, or converted property when [that person] knew that the property was stolen, embezzled, or converted. —Mich. Comp. Laws § 600.2919a(1)(b)

Key features:

The defendant need not be the original thief or converter. A downstream party may be liable for dealing in already-converted property.
However, the statute turns on whether the downstream party knew the property was stolen/embezzled/converted.

2. Precedent: Echelon Homes, L.L.C. v. Carter Lumber Co.

In Echelon Homes, the Michigan Supreme Court addressed the scope of “knowing” conduct under § 600.2919a. The court held that:

“Knowing” in this context means actual knowledge.
Constructive knowledge—what a party should have known if it exercised reasonable care—is not sufficient.

That distinction is crucial. It signals that statutory conversion is not simply a negligence-like regime where failure to inquire can expose downstream recipients of property to automatic treble damages. Instead, the plaintiff bears the burden of showing the defendant subjectively knew the property was tainted.

This Sixth Circuit opinion applies Echelon in a scenario that is, again, factually tied to Carter Lumber’s dealings with a construction contractor. The court does not suggest any expansion or contraction of Echelon; it simply applies the rule rigorously.

3. Imputing employee knowledge to the corporation: Travis v. Dreis & Krump Mfg. Co.

The plaintiffs’ primary innovation was their “institutional knowledge” argument: because Salami himself (as Carter’s employee) allegedly knew he was misusing funds, that knowledge should be treated as the corporation’s knowledge for § 600.2919a.

The Sixth Circuit rejects that approach by invoking Travis v. Dreis & Krump Mfg. Co., a Michigan Supreme Court case discussing how to attribute knowledge to a corporate employer. Travis held that a corporate employer’s “actual knowledge” can be established by showing that a supervisory or managerial employee had knowledge of the relevant condition or risk.

The critical implications, as applied here:

Employee knowledge is not automatically corporate knowledge.
Michigan courts distinguish between line employees and supervisors/managers for imputation purposes.
A corporation’s “actual knowledge” may be derived from officers, directors, and supervisory personnel, but not from every employee merely by virtue of employment.

By framing the “actual knowledge” inquiry through Travis, the Sixth Circuit makes clear that:

Even if Salami personally understood he was misallocating the funds,
That knowledge cannot be imputed to Carter Lumber under Michigan law unless he occupied a supervisory or managerial position at the company.

The record showed he was an outside sales representative, not a manager or supervisor, so the imputation argument fails.

4. Application to Carter Lumber: why summary judgment was proper

The conversion claim fails at the “knowledge” step. The Sixth Circuit focuses on three central facts:

Authorization by the plaintiffs. The plaintiffs themselves authorized Salami to draw from the credit union account to pay construction costs. To Carter Lumber, this appears as an ordinary payment route for an authorized agent.
Account documentation. The checks drawn on the credit union account listed Salami as an “owner/authorized signer,” consistent with his apparent authority to use those funds.
No evidence of limitations communicated to Carter. There was no evidence that Carter Lumber knew (or was told) that Salami’s authority to use the funds was limited solely to invoices for the plaintiffs’ home, nor that the funds had any special trust or earmark character.

Combined with the Echelon/Travis framework, this leads to a straightforward conclusion:

Carter Lumber had no actual knowledge that the funds were being misused or converted.
Any argument that Carter “should have known” is legally irrelevant under Michigan statutory conversion law.
Imputing Salami’s potential knowledge to Carter is impermissible because he was not a managerial or supervisory employee.

With no triable fact issue on actual knowledge, summary judgment for Carter Lumber on the statutory conversion claim was proper.

B. The civil RICO claim

1. RICO basic elements and the “pattern” requirement

Section 1962(c) of the RICO statute makes it unlawful for:

any person employed by or associated with any enterprise engaged in, or the activities of 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.

The Supreme Court in Sedima distilled the required elements into four:

Conduct
Of an enterprise
Through a pattern
Of racketeering activity

Relevantly, “racketeering activity” means a series of statutorily listed criminal acts (called “predicate acts”), such as mail fraud, wire fraud, bank fraud, etc. Under 18 U.S.C. § 1961(5), a “pattern” requires at least two predicate acts within a ten-year period, but the Supreme Court has been explicit that:

While two acts are necessary, they may not be sufficient. Indeed, in common parlance two of anything do not generally form a ‘pattern.’ —H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 237–38 (1989)

Instead, a RICO “pattern” requires:

Relationship among the predicate acts, and
Continuity—either:
- closed-ended continuity: a series of related acts over a substantial period, or
- open-ended continuity: a threat of future criminal conduct extending into the future.

2. Sixth Circuit precedents: Moon and Bachi-Reffitt

The Sixth Circuit’s civil RICO jurisprudence is notably demanding on the continuity requirement, especially in “one dispute = RICO” cases. Two precedents are central:

a. Moon v. Harrison Piping Supply, 465 F.3d 719 (6th Cir. 2006)

In Moon, a plaintiff alleged repeated acts (over roughly 30 months) of mail and wire fraud, all designed to deprive him of worker’s compensation or healthcare-related benefits. The Sixth Circuit held that:

Even though there were numerous predicate acts over an extended time, they were all directed to a single objective (depriving one plaintiff of benefits).
There were no other schemes, no other victims, and no threat of additional future crimes.
Therefore, the alleged conduct did not exhibit the type of continuity that RICO requires.

The court concluded that such conduct “does not bear the markings of the long-term criminal conduct about which Congress was concerned when it enacted RICO.”

b. Bachi-Reffitt v. Reffitt, 802 F. App’x 913 (6th Cir. 2020)

In Bachi-Reffitt, the Sixth Circuit again rejected a RICO claim where the alleged scheme was:

A single scheme
Targeting a single victim (a family member)

The court emphasized that such a one-scheme, one-victim scenario does not constitute an actionable “pattern of racketeering activity.” Although Bachi-Reffitt is unpublished, it is consistent with Moon and the circuit’s broader approach.

3. The Sixth Circuit’s “pattern” analysis in Salamey

The plaintiffs alleged misconduct by Carter Lumber and Salami involving misapplication of funds from the plaintiffs’ credit union account. Carter Lumber responded that there were:

No cognizable RICO predicate acts, and
No “pattern” of racketeering activity even if some acts might otherwise qualify as predicates.

Importantly, the plaintiffs did not substantively respond to either argument at the appellate level. The Sixth Circuit could have treated those points as abandoned, but instead elected to resolve the RICO claim on the merits of the “pattern” question.

The court proceeds as follows:

Assumption in plaintiffs’ favor. The court assumes (without deciding) that the alleged conversion/misuse of funds might qualify as bank fraud, wire fraud, or mail fraud—i.e., RICO predicate acts.
Focus on continuity and scope. The relevant question becomes whether the facts, viewed favorably to the plaintiffs, show a “pattern” under Moon and H.J. Inc.
Single-scheme, single-victim conclusion. The alleged acts are all part of:
- A single scheme: misdirecting or misapplying funds obtained from the plaintiffs’ credit union account.
- A single victim class: the plaintiffs, Nabil and Sonia Salamey.
- A finite timeframe tied to one construction project.
There are no allegations of similar misuses against other customers, of a broader fraudulent modus operandi, or of an ongoing threat that this scheme would continue into the future.

From those points, the Sixth Circuit aligns this case with Moon and Bachi-Reffitt and concludes:

The scheme is too narrow, too time-limited, and too focused on a single victim to qualify as a RICO “pattern.”
Thus, even if the predicate acts requirement were technically met, the continuity requirement for a RICO pattern is not.
Without a pattern, the RICO claim collapses, regardless of how the “enterprise” and “person” are defined.

4. The “enterprise/person” distinctness issue (left unresolved)

The district court had held that Plaintiffs failed on the “enterprise” element because a corporate entity (Carter Lumber) cannot be both the RICO “enterprise” and the “person” liable under § 1962(c). On appeal, the plaintiffs argued that Salami was the “distinct person” who operated the enterprise.

The Sixth Circuit cites Garza v. Lansing Sch. Dist., 972 F.3d 853, 877 (6th Cir. 2020), for the proposition that an appellate court may affirm on any basis supported by the record, even if the district court relied on different reasoning. It then:

Declines to reach the enterprise/person distinctness question.
Affirms solely because the plaintiffs failed to demonstrate a pattern of racketeering activity.

This reinforces a common feature of RICO appellate decisions: courts often choose the cleanest dispositive ground (here, lack of pattern) rather than addressing more contentious structural questions (like enterprise/person distinctness) unless necessary.

V. Complex Concepts Simplified

The opinion uses several legal concepts that benefit from plain-language explanation:

1. Summary judgment

Summary judgment is a procedure where the court decides a claim without a full trial because:

There is no genuine dispute about the key facts, and
Even viewing the evidence in the light most favorable to the non-moving party, the moving party is entitled to judgment as a matter of law.

Here, the Sixth Circuit agreed that no reasonable jury could find that Carter Lumber (a) had actual knowledge of conversion, or (b) engaged in a RICO pattern, based on the record.

2. De novo review

When an appellate court reviews a summary judgment ruling de novo, it:

Re-examines the entire record from scratch.
Applies the same legal standard as the trial court (here, Rule 56 of the Federal Rules of Civil Procedure).
Gives no deference to the district court’s legal conclusions.

3. Statutory conversion vs. common-law conversion

Conversion generally means a wrongful exercise of dominion over someone else’s property, inconsistent with that person’s rights.

Common-law conversion is a judge-made tort with broader, more flexible contours.
Statutory conversion under Mich. Comp. Laws § 600.2919a provides additional remedies (and sometimes treble damages) in specific circumstances, such as when someone deals in property that they know is stolen or converted.

In this case, the plaintiffs pursued statutory conversion, which has the actual knowledge requirement emphasized in Echelon.

4. Actual knowledge vs. constructive knowledge

Actual knowledge means the person truly knew a fact (e.g., “I know this money was stolen”).
Constructive knowledge means the person should have known a fact, if they had exercised reasonable care (e.g., “A reasonable person in your shoes would have realized this money was stolen”).

Michigan’s statutory conversion statute requires actual knowledge. A plaintiff cannot prevail by merely showing the defendant was careless, suspicious, or had reasons to investigate more.

5. Imputing knowledge to a corporation

A corporation is a legal “person” but can only act and think through its human agents. Courts therefore ask:

Which employees’ knowledge and actions count as the corporation’s own?

Michigan, following Travis, generally imputes actual knowledge to a corporation through:

Supervisory or managerial employees, and
Officers or directors.

Line-level employees’ knowledge is not automatically the corporation’s knowledge for purposes like statutory conversion.

6. RICO: predicate acts, pattern, and continuity

Predicate acts are specific crimes listed in the RICO statute, such as mail fraud, wire fraud, bank fraud, bribery, etc.
A pattern of racketeering activity requires:
- At least two predicate acts within 10 years, and
- Proof that these acts are related and amount to or pose a threat of continued criminal activity.
Single-scheme/single-victim problem: If all the alleged acts:
- Serve a single short-term objective,
- Target only one victim, and
- Are naturally limited in duration (e.g., one construction project),
courts often find no RICO pattern because there is no true continuity or long-term threat.

7. Enterprise vs. person under RICO

RICO requires:

A “person” (the defendant) who
Conducts the affairs of an “enterprise” (which could be a corporation, partnership, or association-in-fact).

Generally, the “person” must be distinct from the “enterprise.” Courts often reject RICO claims where the defendant corporation is alleged to be both the person and the enterprise, unless the alleged enterprise is meaningfully broader (e.g., the corporation plus outside actors). This district court relied on that distinctness rule, but the Sixth Circuit did not need to address it given the failure on the “pattern” element.

VI. Impact and Implications

A. For suppliers and other third-party recipients of funds in construction projects

The opinion reinforces a protective principle for suppliers, lenders, and other third parties who receive and apply funds in the ordinary course of business:

Absent clear evidence that they actually know the funds were misappropriated, they are unlikely to incur statutory conversion liability under Mich. Comp. Laws § 600.2919a(1)(b).
A supplier may rely on:
- The apparent authority of authorized signers on an account, and
- Neutral internal policies (like applying undirected payments to the oldest open invoices),
without automatically running afoul of the conversion statute.

However, the decision also signals a cautionary note:

If a supplier acquires more direct knowledge (for instance, explicit notice that certain funds are trust funds for a given project and must not be applied elsewhere), that could satisfy the “actual knowledge” requirement.
Suppliers dealing repeatedly with contractors who mismanage funds should be mindful that at some point they may cross from ignorance into actual awareness of wrongdoing.

B. For Michigan statutory conversion litigation

From a doctrinal perspective, Salamey is consistent with, and reinforces, Echelon:

Statutory conversion is a targeted tort requiring proof of subjective awareness that property is stolen/converted.
It is not a general catch-all remedy for every downstream recipient of misapplied funds.
The route of imputing “institutional knowledge” is constrained by Travis, limiting the attribution of knowledge to managerial or supervisory employees.

Practically speaking, plaintiffs who cannot show:

Explicit communications with the defendant revealing the misappropriation, or
Strong circumstantial evidence of actual awareness,

will face a steep uphill climb in statutory conversion claims against financial intermediaries or suppliers.

C. For civil RICO in the Sixth Circuit

The opinion continues the Sixth Circuit’s consistent message: civil RICO is not a remedy for ordinary commercial or construction disputes, even where there is serious alleged misconduct.

Key implications:

RICO plaintiffs must plead and prove more than a single, finite dispute with one adversary. They should:
- Identify multiple schemes or ongoing fraudulent practices, or
- Show a realistic threat that similar schemes would continue in the future against others.
Where the alleged wrongdoing is tightly bound to one transaction or project, and targets one victim or victim group, RICO continuity will be very difficult to prove.
Counsel contemplating RICO claims in construction fund disputes should carefully consider whether:
- The facts can genuinely support a pattern and continuity theory, or
- More traditional state-law claims (fraud, breach of contract, fiduciary duties, state trust fund statutes, etc.) offer a more realistic path to relief.

D. Litigation strategy lessons

The opinion also illustrates some strategic points for litigators:

Respond to all dispositive arguments. Carter Lumber challenged both the existence of RICO predicate acts and the RICO pattern. The plaintiffs did not respond to either point substantively on appeal. While the Sixth Circuit chose to resolve the case on the merits, appellate silence on a central ground can be risky and may be treated as abandonment.
Be precise about corporate knowledge. When asserting that a corporation “knew” of wrongdoing, plaintiffs should:
- Identify specific decision-makers or managers who were informed, and
- Point to communications or documents evidencing that knowledge.
Vague notions of “institutional knowledge” untethered to managerial-level actors are likely insufficient under Michigan law.
Carefully frame the scope of RICO schemes. To overcome the “single scheme/single victim” hurdle, plaintiffs would need to allege and support a broader fraudulent pattern—e.g., similar misuses of funds affecting multiple customers or projects over time.

VII. Conclusion

Salamey v. Salami (as to Carter Lumber) is a concise but instructive opinion on two fronts. First, it underscores that Michigan statutory conversion claims against downstream recipients of funds hinge on proving actual knowledge of conversion, and that such knowledge is imputed to corporations only through supervisory or managerial employees under Travis. An employee’s personal wrongdoing does not transform the employer into a converter without that managerial nexus.

Second, the opinion reinforces the Sixth Circuit’s firm stance that civil RICO is reserved for patterns of long-term or open-ended criminal conduct, not isolated commercial disputes. A single, finite scheme targeting a single victim, even if involving multiple alleged misuses of funds, falls short of RICO’s “pattern of racketeering activity” requirement, in line with Moon and Bachi-Reffitt.

Taken together, these rulings temper attempts to transform construction fund mismanagement into both statutory conversion and RICO claims against third-party suppliers. While the decision is unpublished and non-precedential, it is a clear and persuasive application of existing Michigan and federal law, and it provides a useful roadmap for how courts in the Sixth Circuit are likely to analyze similar claims going forward.