RICO Mail-Fraud Claims Do Not Require Reliance, and Settlements Do Not Automatically Break Proximate Causation

Introduction

In Allstate Indem Co v. Bhagat (5th Cir. Jan. 14, 2026), Allstate sued individuals and entities associated with Memorial Heights Emergency Center in Houston, alleging a scheme in which personal-injury attorneys referred car-accident clients under letters of protection, after which Memorial Heights allegedly billed for unnecessary or exaggerated emergency services using high-level emergency codes. Those bills were sent to attorneys and then presented to Allstate as part of settlement demands. Allstate sought recovery of roughly $4.7 million and treble damages under civil RICO.

The district court dismissed all claims with prejudice—RICO (18 U.S.C. § 1962(c)), RICO conspiracy (§ 1962(d)), and Texas common-law and equitable claims—primarily on the view that Allstate failed to plead reliance and direct/proximate causation, that Allstate was “complicit” by continuing settlements, and that settlements constituted an intervening cause. The Fifth Circuit reversed and remanded.

Summary of the Opinion

The Fifth Circuit held that the district court analyzed the case under the wrong conceptual framework by treating “fraud” as the operative predicate rather than mail fraud, and by importing common-law reliance into RICO. Under Bridge v. Phx. Bond & Indem. Co., reliance is not an element of civil RICO claims predicated on mail fraud. The court further held Allstate sufficiently pleaded proximate cause and but-for causation; that the settlements did not, as a matter of law, sever causation (consistent with Allstate Ins. Co. v. Plambeck); that Rule 9(b) was satisfied by detailed allegations and an appendix listing billing specifics; and that unjust enrichment and money-had-and-received were plausibly pleaded under Texas law without the district court’s heightened causation/reliance approach. Because dismissal was improper, the court did not reach denial of leave to amend.

Analysis

Precedents Cited

• Pleading and review framework:
  • Heinze v. Tesco Corp. (Rule 12(b)(6) de novo review; accept well-pleaded facts as true).
  • Bell Atl. Corp. v. Twombly and Ashcroft v. Iqbal (plausibility; more than labels and conclusions).
  • Shushany v. Allwaste, Inc. (Rule 9(b) dismissal reviewed de novo).
  • Warren v. Chesapeake Expl., L.L.C., Am. Bankers Ins. Co. v. Inman, Hulin v. Fibreboard Corp., and Erie Railroad Co. v. Tompkins (federal courts’ approach to state-law interpretation).
• RICO predicate, reliance, and causation:
  • Bridge v. Phx. Bond & Indem. Co. (predicate is mail fraud; civil RICO does not incorporate common-law fraud reliance; proximate cause requires a “direct relation,” but can exist even when misrepresentations are made to third parties).
  • Anza v. Ideal Steel Supply Corp. (quoted in Bridge to reinforce that common-law reliance is not automatically imported).
  • Allstate Ins. Co. v. Plambeck (Fifth Circuit insurance-fraud RICO case; insurers are direct, foreseeable victims when the scheme is structured to extract money from them; settlements do not necessarily break causation).
  • United States v. Ramos-Delgado (but-for causation standard: harm would not have occurred absent defendant’s conduct).
  • E.I. du Pont de Nemours & Co. v. McCain (intervening/new cause is part of proximate cause analysis; not necessarily an affirmative defense).
  • Collins v. Morgan Stanley Dean Witter (Rule 12(b)(6) generally confined to pleadings; factual disputes based on outside materials are improper).
• Rule 9(b) particularity:
  • Arruda v. Curves Int'l, Inc. (must plead “who, what, when, where, and how”).
  • Williams v. WMX Techs., Inc. and United States ex rel. Thompson v. Columbia/HCA Healthcare Corp. (core articulation of Rule 9(b)’s “who/what/when/where/how”).
• Texas fraud and conspiracy-to-defraud:
  • Allstate Ins. Co. v. Benhamou (recites Texas common-law fraud elements, citing Tilton v. Marshall).
  • Allstate Ins. Co., L.L.C. v. Receivable Fin. Co. and Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co. (actual reliance requirement in Texas fraud).
  • Bohnsack v. Varco, L.P. (injury must result from reliance).
• Texas equitable remedies:
  • Heldenfels Bros., Inc. v. City of Corpus Christi (unjust enrichment as equitable recovery when benefit obtained by fraud/duress/undue advantage).
  • City of Corpus Christi v. S.S. Smith & Sons Masonry, Inc. (unconscionability framing for retention of benefit).
  • Fortune Production Co. v. Conoco, Inc. (invoked by defendants to argue contracts preclude unjust enrichment; Fifth Circuit distinguished it).
  • Bank of Saipan v. CNG Fin. Corp. and Staats v. Miller (money-had-and-received: equitable question of which party, in justice, owns the money; minimal technicality).
  • State Farm Mut. Auto. Ins. Co. v. Misra (money-had-and-received plausibly stated in a similar alleged insurer-fraud scheme; wrongdoing not always required at pleading stage).
• Appellate restraint on unaddressed issues:
  • Deanda v. Becerra and Rest. L. Ctr. v. U.S. Dep't of Lab. (“court of review, not first view”); used to decline addressing privileges not reached below.

Legal Reasoning

1) Correct identification of the RICO predicate: mail fraud, not “fraud”

The opinion’s foundational move is doctrinal: the “racketeering activity” element in § 1962(c) is defined by statute, and here the predicate is mail fraud, not a generic common-law fraud claim. Relying on Bridge v. Phx. Bond & Indem. Co., the Fifth Circuit emphasized that courts cannot assume common-law elements (especially reliance) transfer into RICO simply because the predicate conduct “sounds in fraud.”

2) Reliance is not required for RICO claims predicated on mail fraud

The district court treated reliance as essential and faulted Allstate for not pleading reliance in settling each of 635 claims. The Fifth Circuit held this was legal error under Bridge, and reaffirmed its own precedent in Allstate Ins. Co. v. Plambeck that reliance is not necessary in RICO cases predicated on mail fraud.

3) Proximate cause and settlements: directness and foreseeability control, not formal privity or settlement “intervention”

Addressing causation, the court applied Bridge’s “direct relation” test and treated proximate cause as a “flexible concept.” It found Allstate plausibly alleged that the alleged billing scheme was structured to obtain settlement money from insurers—making Allstate a foreseeable and intended victim, as in Plambeck.

Critically, the court rejected the notion that a settlement payment automatically becomes an intervening cause that severs liability. Under Plambeck, the causal chain is not broken merely because fraudulent medical bills are presented through settlement demands and incorporated into settlement amounts; rather, that is part of the scheme’s mechanism.

4) But-for causation and damages were plausibly pleaded

The court held Allstate met the low threshold for but-for causation (United States v. Ramos-Delgado) by alleging it would not have paid the amounts associated with the fraudulent bills absent the scheme. On damages, the court treated Allstate’s allegations as concrete—specific settlement allocations totaling about $4.7 million—rejecting defendants’ characterization as speculative and citing Plambeck for the sufficiency of similar damages theories.

5) Rule 9(b): detailed scheme allegations plus an appendix can satisfy particularity for mass claim sets

Applying Arruda v. Curves Int'l, Inc., the court held Allstate pleaded the “who, what, when, where, and how,” including through a detailed appendix listing each allegedly fraudulent billing. This is significant in high-volume billing fraud cases: the opinion signals that particularity can be achieved through structured detail (tables/appendices), not only narrative.

6) Texas common-law fraud: reliance pleaded; “adversarial settlement context” is not a categorical bar

For Texas fraud, the court accepted that reliance is required (Allstate Ins. Co., L.L.C. v. Receivable Fin. Co.; Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co.), and held Allstate adequately alleged it relied on the medical bills in paying settlement amounts. The court rejected defendants’ attempt to recast settlement negotiations as a per se “no reasonable reliance” zone, noting defendants cited no authority that insurers cannot reasonably rely on medical information presented as fact during settlement.

Because the parties agreed conspiracy-to-defraud rises or falls with fraud, the survival of fraud carried the conspiracy claim.

7) Equitable claims: unjust enrichment and money-had-and-received are not confined to the district court’s fraud/causation framing

The district court dismissed these claims on the view they depended on a plausibly pleaded fraud claim plus “direct” multiple injuries. The Fifth Circuit corrected the standard: under Texas law, unjust enrichment focuses on wrongful receipt/retention of a benefit (Allstate Ins. Co. v. Benhamou; Heldenfels Bros., Inc. v. City of Corpus Christi), and money-had-and-received asks in equity who owns the money (Bank of Saipan v. CNG Fin. Corp.; Staats v. Miller), being “less restricted” by technicalities.

Importantly, the court rejected defendants’ contract-based preclusion argument drawn from Fortune Production Co. v. Conoco, Inc. because, as pleaded, there was no direct agreement between Allstate and defendants. It also held Allstate need not plead “wrongdoing” to state money-had-and-received, citing State Farm Mut. Auto. Ins. Co. v. Misra.

Impact

• Reinforces a bright-line point in RICO pleading: district courts may not require civil RICO plaintiffs to plead or prove common-law reliance when the predicate is mail fraud. This reduces a frequent early-dismissal lever in insurer/provider fraud suits.
• Limits “settlement-as-intervening-cause” defenses at the pleading stage: when a scheme allegedly uses settlement demands as the conduit for extracting payments, settlements are not inherently superseding causes; causation turns on directness and foreseeability under Bridge and Plambeck.
• Provides a practical Rule 9(b) roadmap for high-volume billing schemes: detailed appendices identifying billings can satisfy particularity, making it harder to defeat claims solely by pointing to the number of transactions.
• Strengthens equitable recovery options for insurers: unjust enrichment and money-had-and-received remain viable paths even where defendants argue that underlying settlements with claimants were “good faith,” and contract preclusion arguments may fail absent a direct plaintiff–defendant contract.
• Signals caution against manageability-based dismissals on the pleadings: while the panel did not separately analyze the district court’s “cannot be judiciously managed” rationale, its reversal undermines the idea that claim volume alone justifies dismissal with prejudice at Rule 12.

Complex Concepts Simplified

• Civil RICO (§ 1962(c)): a civil claim targeting participation in an “enterprise” through a “pattern” of specified crimes (“racketeering activity”). The “specified crimes” are defined by statute; here, the key predicate alleged is mail fraud.
• Mail fraud as a predicate: using the mail to further a fraudulent scheme. In RICO, the elements that matter come from the statute, not from common-law fraud doctrine.
• Reliance: in common-law fraud, the victim must have acted because it believed the misrepresentation. Under Bridge, reliance is not an element of a RICO claim predicated on mail fraud (even if someone else relied, or no one’s reliance is shown at the pleading stage).
• But-for causation vs. proximate cause: but-for asks “would the harm have happened anyway?” Proximate cause asks whether the connection is sufficiently direct and foreseeable to impose liability, avoiding overly remote chains.
• Intervening cause: an event that might break the causal chain. The court treated settlements not as automatic intervening causes when they are allegedly the mechanism the scheme uses to obtain the money.
• Rule 9(b): fraud allegations must be pleaded with detail—who did what, when, where, and how. Large schemes can satisfy this via structured, transaction-by-transaction detail.
• Unjust enrichment and money-had-and-received: equitable claims focused less on technical elements and more on whether it would be unfair for the defendant to keep money/benefits that in justice belong to the plaintiff.
• Letters of protection: arrangements in personal-injury practice where a provider agrees to treat a client with payment to come from a later settlement; in this case, those letters allegedly facilitated the flow of bills into settlement demands.

Conclusion

Allstate Indem Co v. Bhagat re-centers civil RICO analysis on the statutory predicate—mail fraud—rejecting reliance requirements imported from common-law fraud and refusing to treat insurer settlements as automatic intervening causes. The opinion also confirms that detailed, transaction-specific pleading (including appendices) can satisfy Rule 9(b) in large-scale billing schemes, and it restores equitable Texas remedies where defendants allegedly received and retained settlement funds tied to unnecessary or inflated medical billing. In practical terms, the decision lowers pleading-stage barriers for insurers challenging alleged settlement-driven medical billing enterprises while keeping traditional causation limits grounded in directness and foreseeability, not formalities of who received the bill or who signed the settlement.