RICO Lawyer & Attorney : Thomas Walker : Cosho Humphrey Law Firm : RICO Act, Federal and State Racketeering Litigation, Boise Idaho

The Oregon Supreme Court affirmed a jury verdict awarding $2.5 million to the American Federation of Teachers-Oregon, AFT, AFL-CIO and against Oregon Taxpayers United Pac, an Oregon political committee and the Oregon Taxpayers United Education Foundation, an Oregon nonprofit corporation in American Fed. Teachers v. Oregon Taxpayers United,--- P.3d ----, 2008 WL 2636555 (Or.)).This case required the court to interpret and apply the Oregon Racketeer Influenced and Corrupt Organization Act (ORICO).  A jury found that defendants ‒ a political action committee and a nonprofit corporation controlled by the same individuals ‒ engaged with others in a pattern of racketeering activity, as defined in ORICO, by forging signatures to qualify two ballot measures for the 2000 general election and by filing false statements with the state from 1998 through 2000 concerning their expenditures and contributions. The jury also found that defendants' illegal conduct injured plaintiffs-two labor organizations-that spent substantial amounts of money opposing the ballot measures. The jury determined that plaintiffs had suffered damages of approximately $840,000, which the trial court trebled pursuant to ORICO. The trial court entered a money judgment in favor of plaintiffs in the amount of approximately $2.5 million and issued an injunction barring defendants from engaging in certain activities. The Court of Appeals reversed one part of the judgment, but otherwise affirmed.

On review, defendants argued that, even if their acts constituted ORICO violations, those acts were not the cause of plaintiffs' injuries and, therefore, that plaintiffs were not “injured by reason of” defendants' acts within the meaning of ORINCO. The Oregon Supreme Court concluded that the evidence was sufficient to permit a jury to find that plaintiffs were “injured by reason of” defendants' conduct.

• Print
• Comments
• Trackbacks

In Liquidation Commission of Banco Intercontinental, S.A. v. Renta, --- F.3d ----, 2008 WL 2446320 (C.A.11 (Fla. June 19, 2008), the Eleventh Circuit Court of Appeals held that the Racketeer Influenced and Corrupt Organizations Act ("RICO") can be applied extraterritorially. This case is a civil RICO and fraudulent transfer case arising out of the 2003 collapse of Banco Intercontinental SA (BanInter), which at that time was among the largest banks in the Dominican Republic. After its collapse, the affairs of BanInter were taken over by the Liquidation Commission, a receivership established by the Dominican government. The Commission brought this suit against Luis Alvarez Renta, a Florida businessman, claiming that Renta, with the help of BanInter insiders, wrongfully diverted millions in BanInter funds to finance other business ventures and personal expenses.

Three RICO claims and one fraudulent transfer claim were tried to a jury, which returned a verdict for the Liquidation Commission in all respects. After trebling of the racketeering damages, the judgment totaled approximately $177 million.

Renta appealed, arguing that the entire case should have been dismissed for forum non conveniens, that the RICO claims should have been dismissed for unripeness and because the statute cannot apply extraterritorially. Judge Kravitch, writing for the panel of three judges, upheld the District Court’s judgment. With regarding to the extraterritorial issue, Judge Kravitch framed the initial question as whether Congress intended the statute in question to apply to conduct occurring outside the United States. The Court noted that some courts have held that RICO does not apply to conduct outside of the United States. However, the more widely accepted view, and the one the Eleventh Circuit adopted, is that RICO may apply extraterritorially if conduct material to the completion of the racketeering occurs in the United States, or if significant effects of the racketeering are felt in the United States.

• Print
• Comments
• Trackbacks

On June 9, 2008 Justice Thomas delivered the opinion in Bridge v. Phoenix Bond & Indemnity Co., --- S.Ct. ----, 2008 WL 2329761 (U.S.) for a unanimous court holding that a plaintiff asserting a RICO claim predicated on mail fraud need not show, either as an element of its claim or as a prerequisite to establishing proximate causation, that it relied on the defendant's alleged misrepresentations. The Racketeer Influenced and Corrupt Organizations Act (RICO or Act), 18 U.S.C. 1961 - 1968, provides a private right of action for treble damages to “[a]ny person injured in his business or property by reason of a violation” of the Act's criminal prohibitions.  The question presented in this case is whether a plaintiff asserting a RICO claim predicated on mail fraud must plead and prove that it relied on the defendant's alleged misrepresentations.

• Print
• Comments
• Trackbacks

 Melvyn Weiss, the plaintiffs’ lawyer who pioneered a controversial and lucrative area of law suing corporations on behalf of shareholders, was sentenced on June 2nd in federal court in Los Angeles to 30 months in prison. Weiss pleaded guilty in March to racketeering conspiracy in connection with his former law firm’s alleged improper payments of kickbacks to class-action clients.

• Print
• Comments
• Trackbacks

Although not involving a civil RICO claim, the court in Connor v. Sun Trust Bank, 2008 WL 623027 (N.D.Ga. Mar. 5, 2008) sanctioned the defendant for failing to produce an email.  Emails are often important evidence in civil RICO cases.  So this decision is noteworthy.  In the Connor case the plaintiff alleged interference and retaliation claims under the Family and Medical Leave Act (FMLA).  The plaintiff filed a motion for sanctions based on the defendant’s failure to produce a highly relevant email during discovery. The plaintiff located, through other means, a relevant email that explained her dismissal to other employees. The defendant moved for summary judgment relying on their 30-day email destruction policy which automatically deleted emails that were thirty days old, unless they were first archived by the user. The court, unpersuaded by the defendant’s reasoning, granted the plaintiff’s motion for sanctions and issued an adverse jury instruction.

• Print
• Comments
• Trackbacks

Yesterday, April 3, 2008, the Second Circuit Court of Appeals reversed Judge Jack Weinstein’s grant of class certification for “light” cigarette litigants in McLaughlin v. American Tobacco Co., --- F.3d ----, 2008 WL 878627 (C.A.2 (N.Y.). Plaintiffs, a group of smokers allegedly deceived-by defendants' marketing and branding-into believing that “light” cigarettes (“Lights”) were healthier than “full-flavored” cigarettes, sought and were granted class certification. Schwab v. Philip Morris USA, Inc., 449 F.Supp.2d 992 (E.D.N.Y.2006) (Jack B. Weinstein, Judge). Plaintiffs' suit was brought under RICO, with mail and wire fraud as the necessary predicate acts. See 18 U.S.C. § 1962(c) (forbidding “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”); see also id.§ 1961(1) (providing that mail and wire fraud constitute racketeering activity); cf. id. § 1341 (mail fraud statute); id. § 1343 (wire fraud statute). The essence of plaintiffs’ complaint is that defendants’ implicit representation that Lights were healthier led them to buy Lights in greater quantity than they otherwise would have and at an artificially high price, resulting in plaintiffs' overpayment for cigarettes.  Plaintiffs allege claims arising from their purchase of Lights from 1971, when defendants first introduced Lights, until the date on which trial commences.

With respect to the plaintiffs’ RICO claims, Judge John Walker in the Second Circuit’s opinion noted that Section 1964(c) of Title 18 (“civil RICO”) gives private citizens a cause of action under RICO by providing that “[a]ny person injured in his business or property by reason of a violation of [RICO's substantive provisions] may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.”18 U.S.C. § 1964(c). To fulfill the requirement that the injury occur “by reason of” a defendant's action, a plaintiff must show “that the defendant's violation not only was a ‘but for’ cause of his injury, but was the proximate cause as well.”Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992); see also Commercial Cleaning Servs., L.L.C. v. Colin Serv. Sys., Inc., 271 F.3d 374, 380 (2d Cir.2001) ( “RICO's use of the clause ‘by reason of’ has been held to limit standing to those plaintiffs who allege that the asserted RICO violation was the legal, or proximate, cause of their injury, as well as a logical, or ‘but for,’ cause.”). “But for” causation is also known as “transaction causation,” or “reliance,” while proximate causation is often referred to as “loss causation.” See, e.g., Moore v. PaineWebber, Inc., 189 F.3d 165, 169-70 (2d Cir.1999); Powers v. British Vita, P.L.C., 57 F.3d 176, 189-90 (2d Cir.1995); see also Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341 (2005) (noting that reliance is “often referred to ... as ‘transaction causation’ ”). Thus, a plaintiff asserting a civil RICO claim must be able to support allegations of (1) a RICO violation, (2) injury, and (3) transaction and loss causation. First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 769 (2d Cir.1994). Judge Walker noted that to prevail in their argument for class certification, plaintiffs must establish that the issues of injury and causation do not defeat the predominance requirement of Rule 23(b)(3).  For the reasons set forth in the opinion, the Second Circuit found that plaintiffs failed to meet this burden.

• Print
• Comments
• Trackbacks

A national class action was certified on March 19, 2008 in New England Carpenters Health Benefits Fund v. First DataBank, Inc., 2008 WL 723774 (D.Mass.) against First DataBank, Inc. and McKesson Corporation. Plaintiffs allege that First DataBank and McKesson engaged in a racketeering enterprise (the “Scheme”) to fraudulently state the “average wholesale price” (“AWP”) for numerous prescription pharmaceuticals beginning in late 2001, in violation of 18 U.S.C. § 1964 and California state law. The Scheme allegedly jacked up the AWP by five percent for over 400 brand-name, self-administered drugs sold through retail pharmacies, including mail order (the “Marked Up Drugs”). This allegedly fraudulent price hike caused damages to consumers and 11,000 third party payors (“TPPs”) across the nation.

To recap the allegations, beginning in late 2001, First DataBank, a drug pricing publisher, and McKesson, a drug wholesaler, reached a secret agreement to raise the Wholesale Acquisition Cost (“WAC”) to AWP spread from 20% to 25% for the over four hundred Marked Up Drugs. McKesson communicated these new 25% WAC to AWP markups to First DataBank, which then published AWPs with the new markup. To conceal the Scheme, McKesson and First DataBank agreed to effectuate price changes only when some other WAC-based price announcement was made by a drug manufacturer. By 2002, McKesson estimated that 95% of all prescription drug manufacturers used the inflated 25% markup, and that, by 2004, 99% of all prescription drug manufacturers did so. The Scheme ended on March 15, 2005, when First DataBank disclosed that it had ceased to conduct surveys of the market to obtain AWP information, contradicting prior statements.

The Scheme allegedly resulted in higher profits for retail pharmacies that purchase drugs on the basis of WAC, but get reimbursed on the basis of AWP.  According to the Plaintiffs, McKesson implemented the Scheme in order to provide this greater AWP “spread” to important retail pharmacy clients like Rite Aid and Walmart as well as its own pharmacy related businesses.

• Print
• Comments
• Trackbacks

On February 13, 2008, Chief Judge Curtis L. Collier of the United States District Court, Eastern District of Tennessee, Winchester Division, granted Tyson Foods’ motion for summary judgment in a lengthy, vigorously contested civil case brought by a class of current and former employees at several chicken processing plants. The plaintiffs brought the lawsuit under the civil provisions of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1962, 1964. The plaintiffs alleged that Tyson was a member of a conspiracy to knowingly bring illegal immigrants into the United States and employ them in violation of United States Immigration laws. This alleged conspiracy involved prolonged efforts to harbor and conceal these illegal immigrants from detection by the proper authorities. The plaintiffs claimed that, by hiring and harboring illegal immigrants, Tyson was thus able to pay less than the going market wage to its employees. As a result, plaintiffs, as legally-authorized employees, were paid less than they should have been as a result of Tyson’s use of illegal alien labor. Plaintiffs sought to recover damages in the amount of triple the difference between their artificially-depressed wages and the competitive market wages Plaintiffs should have been paid.

Judge Collier concluded that the plaintiffs failed to establish a RICO claim predicated on evidence showing Tyson had at least ten illegal aliens employed at each of its facilities, and that Tyson had actual knowledge each facility employed at least ten individuals who were unauthorized to work in the United States and were brought into the country for purposes of illegal employment.

• Print
• Comments (1)
• Trackbacks

On January 4, 2008, the Supreme Court of the United States agreed to determine “Whether reliance is a required element of a RICO claim predicated on mail fraud and, if it is, whether that reliance must be by the plaintiff.” According to the grant of the petition for a writ of certiorari in John Bridge, et al. v. Phoenix Bond & Indemnity, et al., the brief of petitioners is to be filed on or before Thursday, February 14, 2008. The brief of respondents is to be filed on or before Wednesday, March 12, 2008. A reply brief, if any, is to be filed in accordance with Rule 25.3 of the Rules of the Court. RICO Law Blog will keep an eye on this important case,

• Print
• Comments (2)
• Trackbacks

In an apparent effort to stop “harassment” by the United Food and Commercial Workers union’s “corporate campaign,” Smithfield Foods management personnel brought a $5 million lawsuit against the union for its “public smear campaign.”  The suit was filed in Richmond, Va. under the Racketeer Influenced and Corrupt Organizations Act.   According to Smithfield’s management, the United Food Workers have carried their aggressive “tricks” to far. Smithfield claims it has been harassed for many year, including boycotts, heckling people who promote Smithfield food products, and disruptive protests during shareholder meetings.  A company manager remarked, “This lawsuit was a last resort.” Smithfield’s huge hog-processing plant in Bladen County, North Carolina employing 5000 people is a union target for organization.

• Print
• Comments
• Trackbacks (1)

The Dow Jones Newswire reported on December 5, 2007 that Sebastian River Holding's Inc. (SBRV) filed a lawsuit against E*Trade Financial Corp. alleging collusion by E*Trade employees to manipulate Sebastian's stock price.

The Sebastian, Fla., financial holding company said E*Trade illegally froze shareholders' accounts, preventing them from buying or selling shares or withdrawing cash.

Sebastian River is suing under the civil section of the Racketeer Influenced and Corrupt Organizations Act and seeking actual and punitive damages for loss of market value and loss of business opportunity.

• Print
• Comments
• Trackbacks

The plaintiffs in a lawsuit accusing Tyson Foods Inc. of hiring illegal aliens to work at poultry plants are focusing on the meat producer’s relationship with the League of Latin American Citizens. The class-action suit in U. S. District Court in Eastern Tennessee claims Springdale-based Tyson Foods knowingly hired illegal aliens to work for wages below what American workers would take. It was filed in April 2002 on behalf of former Tyson workers in several states, not including Arkansas. Trial is set for March 3, 2008.  

The plaintiffs in Trollinger v. Tyson are chicken plant workers who said they were harmed by a scheme by Tyson’s top management to depress wages, court documents state. “We believe Tyson has used its relationship with LULAC to help carry out a ‘willful blindness’ policy of hiring illegal workers,” said the plaintiffs ’ attorney, Howard W. Foster of Chicago. “Tyson is very close with LULAC, especially in Springdale, and we’re alleging that the groups have agreed not to investigate workers who are suspected illegal aliens.” Last week, the former director of the Arkansas chapter of the League of Latin American Citizens filed a motion to avoid giving a deposition in the case. In October, LULAC’s Housing Commission fought subpoenas seeking evidence in the case.

Tyson spokesman Gary Mickelson said the company continues to deny claims in the suit and will file a motion for summary judgment mid-month. “We have a zero-tolerance policy for hiring people who are not authorized to work in the United States,” Mickelson said. “We value our relationships with various advocacy groups, including those representing the Hispanic community. Claims that those relationships are improper are not only false, but they are absurd.”

Mr. Foster, the plaintiffs’ lawyer, commented that this is one of the first suits to allege “illegal immigrant hiring scheme” under the RICO. RICOLaw Blog will keep an eye on this case.

• Print
• Comments
• Trackbacks

Since 2003 the Recording Industry Association of America (RIAA) has filed almost 15,000 lawsuits charging computer users with trading music online. Now one of its targets is suing back. Tanya Andersen, a 42-year-old disabled single mother, has filed a countersuit in Oregon alleging that the industry's practices violate, among other laws, the state's Racketeer Influenced and Corrupt Organizations Act.

Last February, Andersen got a letter from a Los Angeles law firm informing her she was being sued for copyright infringement.  MediaSentry, an investigator retained by the recording industry, had allegedly caught her collecting gangsta rap on her hard drive late one night using peer-to-peer file sharing software.  Andersen's attorney, Lory R. Lybeck, says Andersen doesn't know how to use such software – indeed, that she doesn't even like gangsta rap. According to Lybeck, when Andersen tried to protest her innocence and offered up her computer for forensic analysis, she was told that the suit had to continue or others might be deterred from settling.

If Andersen really is being falsely charged, she probably isn't unique. In October attorney Ray Beckerman, who is defending another single mother against an RIAA suit, told Wired News he believes thousands of defendants may have been falsely accused. As Electronic Frontier Foundation Legal Director Cindy Cohn points out, investigators may incorrectly link file lists to Internet protocol addresses, and cable companies have been known to incorrectly link IP addresses to customers. Furthermore, as home and cafe wireless networks become more common, there's no guarantee that the customer was the one sharing music.

Article provided by Mustang 88 FM Jakarta.

• Print
• Comments
• Trackbacks

The Supreme Court on Monday October 15^th rejected an appeal by Microsoft Corp. and a unit of Best Buy Co. to dismiss a lawsuit alleging violation of racketeering laws through fraudulently signing up customers for Microsoft's online service.

The companies asked the justices to overturn a May ruling by the San Francisco-based U.S. 9th Circuit Court of Appeals, which said the civil suit could proceed. The Supreme Court is letting that ruling stand, which means the class-action lawsuit involving thousands of consumers with complaints against the companies will be litigated in federal district court.

Under a joint venture, Redmond, Wash.-based Microsoft invested $200 million in Richfield, Minn.-based Best Buy in April 2000 and agreed to promote the retailer's online store through its Internet access service, MSN. In turn, Best Buy agreed to promote MSN in its stores.

The dispute began in 2003, when James Odom sued the companies after purchasing a laptop computer at Best Buy.

Best Buy allegedly signed up Odom for a six-month free trial of MSN with the credit card he used to pay for the computer. After the trial ended, Microsoft began charging him for the account.

• Print
• Comments
• Trackbacks (1)

A New Jersey federal judge on Friday, September 28^th, threw out the remaining racketeering claims pending against several dozen insurers and brokers in a class action lawsuit stemming from industry wide investigations into bid-rigging and client-steering allegations.

The decision, which follows a recent ruling dismissing antitrust claims against the brokers and insurers, resolves the major claims in the consolidated litigation brought on behalf of commercial property/casualty insurance policyholders and employee benefit plan sponsors, who sued the firms following the investigations initiated by then-New York Attorney General Eliot Spitzer.

Plaintiffs alleged that the companies engaged in a conspiracy in which they allocated clients, fixed prices and restrained trade in violation of Racketeer Influenced and Corrupt Organizations Act and the Sherman Antitrust Act. In earlier rulings, Judge Brown and a previously assigned judge rejected antitrust and RICO allegations against the insurers and brokers. Judge Brown earlier this year gave plaintiffs a final chance to amend their filings and bolster their case with supplemental pleadings.

After ruling in late August that the consolidated suit lacked factual support for claims of a widespread antitrust conspiracy, U.S. District Judge Garrett E. Brown Jr. said Friday the suit also lacked factual evidence of a RICO enterprise.

“Plaintiffs’ allegations offer nothing more than a kaleidoscope of acts executed by a kaleidoscope of actors, and combine broker-defendants and insurer-defendants in such a fashion that the court is unable to discern any systemic permutation,” Judge Brown wrote in his 73-page decision. “While discussing dozens of transactions and hundreds of actors, plaintiffs fail to outline even a single set of actors that interacted with each other and executed their transactions systemically.”

The plaintiffs alleged the brokers and insurers participated in the operation or management of a RICO enterprise by, among other things, reaching agreements with each of the insurers regarding the amount of contingent commissions to be paid to the broker and the level of business to be steered to each insurer defendant and then coordinated the concealment of the scheme, according to court papers.

• Print
• Comments
• Trackbacks (1)

Carl J. Mayer, on behalf of himself and all others similarly situated, filed a Class Action RICO lawsuit against The New England Patriots and Coach Bill Belichick in The United States District Court For The District Of New Jersey. The complaint states that the core of the lawsuit is that the Defendants, during a game with the New York Jets on September 9, 2007, instructed an agent of the Defendants to surreptitiously videotape the New York Jets coaches and players on the field with the purpose of illegally recording, capturing and stealing the New York Jets signals and visual coaching instructions. The Defendants were in fact subsequently found by the National Football League (“NFL”) to have improperly engaged in such conduct. This violated the contractual expectations and rights of New York Jets ticket-holders who fully anticipated and contracted for a ticket to observe an honest match played in compliance with all laws and regulations. Plaintiffs also contend that in purchasing tickets to watch the New York Jets that, as a matter of contract, the tickets imply that each game played will be played in accordance with NFL rules and regulations as well as all applicable federal and state laws. Among several other claims, the Plaintiffs contend that Defendants violated state and federal racketeering laws.

• Print
• Comments
• Trackbacks

There are cases in which combining federal antitrust and RICO claims in a single suit can create a powerful litigation strategy. Such situations often arise in “associated in fact” enterprises consisting of several different business entities that have engaged, or are engaging, in a scheme that defrauds consumers and at the same time restrains trade and/or fixes prices.

Complaints asserting antitrust violations usually rely on the classic underlying antitrust statute, section 1 of the Sherman Act. Since its enactment almost a century ago, this statute has provided essentially as follows: “Every contract, combination . . . conspiracy in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. . . .” Section 2 of the Sherman Act may also be implicated: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony . . . .”

Combinations violating the Sherman Act may also constitute an “associated in fact” enterprise, and if the combination uses the United States mail, or telephone and facsimile services, or email and/or the Internet to implement and carry out a program that defrauds consumers or other businesses, the perpetrators also commit mail and wire fraud in violation of 18 U.S.C. §§ 1341 and 1343, respectively, which are predicate acts under the federal RICO Act.

The Sherman and RICO Acts provide for treble damages and an award of litigation costs and fees to the prevailing plaintiff. There are other similarities between the elements of the Sherman and RICO Acts that provide additional leverage to a plaintiff injured in his business or property by reason of the defendants’ violations of these two potent federal statutes. In addition, such cases usually involve pendent state law claims, including violations of state competition and racketeering acts that can also be tried in the federal court.

• Print
• Comments (1)
• Trackbacks

Federal prosecutors are wrapping up -- without going to trial – a case against eight people accused of smuggling millions of dollars worth of cigarettes from North Idaho to tribal smoke shops in western Washington.

A trial date was recently cancelled with guilty pleas from four final defendants, including accused ringleader Louie Mahoney, of Plummer, Idaho.

The latest guilty pleas came eight months after at least three defendants from western Washington cut plea-bargain deals with federal prosecutors and agreed to testify against Mahoney and other co-conspirators living in North Idaho, court documents reveal.

The smuggling operation between 1999 and May 2003 cost the state of Washington an estimated $56 million in lost taxes, according to Jim McDevitt, the U.S. attorney for the Eastern District of Washington.

As part of the investigation and an earlier companion case involving six other defendants, a special task force seized $5.1 million in cash and more than 200,000 cartons of cigarettes.

Defendants in both cases agreed to forfeit the cash and cigarettes to the federal government as a condition of their plea agreements.

• Print
• Comments
• Trackbacks

The Franchise Opportunity WebLog posted the following report on August 16, 2007:

Quizno’s might have been one of the first chains in the country to market toasted subs, but it’s the franchisees who are feeling toasted right now. A class action suit has been filed in U.S. District Court in Colorado against Quizno’s.

The class action lawsuit was announced in a press release by the Toasted Subs Franchisee Association, Inc.. Their class action lawsuit has been filed on behalf of an estimated 5,000 Quizno's franchisees across the country according to the press release. The franchisees have alleged that Quinzo’s has violated a collection of five different laws.

These charges allege that they have broken laws such as statutory and common law fraud and violated both federal and state antitrust laws. Allegations also include that Quizno's violated the Racketeer Influenced and Corrupt Organizations Act (RICO Act). Franchisees are also claiming that Quizno’s is guilty of breach of contract, along with violating Colorado’s franchise and consumer protection laws.

• Print
• Comments (1)
• Trackbacks

For some unexplained reason landowners who feel they have gotten the short end of the stick from zoning officials often sue under the Racketeer Influenced and Corrupt Organizations Act (RICO), or a state law equivalent. These cases are almost always unsuccessful. The latest appeals court decision dealing with these issues was issued by the Tenth Circuit Court of Appeals in Gillmor v. Thomas, 490 F.3d 791, (10^th Cir. 2007),a case brought by several landowners against Summit County, Utah and its zoning regime. The landowners brought suit against several County Officials alleging that their administration of Summit County's zoning ordinances constitutes a pattern of extortion in violation of RICO.  The United States District Court concluded that the county officials had not committed any illegal predicate acts as required to support a RICO claim. Consequently, it granted summary judgment against the landowners and dismissed their case. The landowners appealed to the Tenth Circuit.

The Tenth Circuit held that the landowners' allegations that the administration of county's zoning ordinances by county officials constituted a pattern of extortion in violation of RICO were sufficient to establish a causal connection between the officials' alleged racketeering activities and some injury to landowners’ business or property, as required to have standing to bring RICO claims against the officials.  However, the Appellate Court found that the county officials' enforcement of presumptively valid county zoning ordinances against landowners did not constitute a pattern of extortion under the Hobbs Act, and thus the officials' enforcement actions were not predicate acts, as would support the landowners' RICO claims. The court noted that most of the officials' actions were simply the normal administrative duties required to enforce the zoning ordinances, including explaining to landowners either how the zoning scheme worked, or rejecting allegations of the scheme's invalidity.

The Tenth Circuit concluded that the district court was correct in finding that the landowners could not prove the existence of any predicate acts, as required by § 1961 of RICO.

• Print
• Comments
• Trackbacks

The Ninth Circuit overruled prior Ninth Circuit precedent in Odom v. Microsoft Corp., 486 F.3d 541, 543 (9th Cir. 2007), holding that its prior case law concerning “enterprises” under Racketeer Influenced and Corrupt Organizations Act (RICO) is confusing and inconsistent with United States Supreme Court authority.

Odom v. Microsoft was filed as a class action alleging a RICO violation because “Best Buy and Microsoft, acting together pursuant to their agreement, constituted an associated-in-fact enterprise under RICO; that their actions, involving ‘thousands’ of consumers, constituted a ‘pattern of racketeering activity’ under RICO; and that they committed the RICO ‘racketeering activity’ predicate act of wire fraud in violation of 18 U.S.C. § 1343.” The complaint alleged that Best Buy gave customers different MSN trial software depending on the product purchased, and scanned debit/credit card information with the trial software not for “inventory control” (as purportedly represented to customers) but so Microsoft would have billing information for customers who failed to cancel their trial subscriptions to MSN.  Specifically, one of the plaintiffs alleged that he purchased a laptop computer from Best Buy and told the company that he did not need the MSN trial software because he used another Internet service, that he never used the MSN software during the 6-month trial period following his purchase, and that after 6 months MSN began charging the credit card he used to purchase the laptop for Internet service.

Best Buy and Microsoft moved to dismiss the case under Rule 12(b)(6), Federal Rules of Civil Procedure, and United States District Court Judge for the Western District of Washington, Marsha J. Pechman, dismissed the customers' class action Racketeer Influenced and Corrupt Organizations Act (RICO) suit for failure to allege an “associated in fact” “enterprise” and for failure to plead wire fraud with particularity. The Ninth Circuit reversed and remanded the case for trial holding that (1) an associated-in-fact enterprise under RICO does not require any particular organizational structure, separate or otherwise; overruling Wagh v. Metris Direct, Inc., 348 F.3d 1102;Simon v. Value Behavioral Health, Inc., 208 F.3d 1073 and Chang v. Chen, 80 F.3d 1293; (2) the customers sufficiently alleged that manufacturer and retailer formed an associated-in-fact enterprise; and (3) employee of retailer's store did not need to be named in order to plead predicate act of wire fraud.

Judge Silverman wrote a concurring opinion, joined in by Rymer, Tallman, Rawlinson and Bea, that argued the class action complaint failed to plead an “enterprise” within the meaning of RICO because it fails to allege an “ongoing organization” between Microsoft and Best Buy, but concurred in the result because the district court should have granted leave to amend the complaint. Judge Bybee also wrote a concurring opinion, joined in by Reinhardt, that argued it was “outlandish that what Judge Silverman correctly describes as a ‘marketing contract’ between Microsoft and Best Buy could subject them to a private RICO action.”

• Print
• Comments
• Trackbacks

A case reported out of the United States District Court, E.D. Virginia, Norfolk Division on July 25, 2007, Rux v. Republic of Sudan, 2007 WL 2127210 (E.D.Va.), reminded me of the unique breadth of RICO. In Rux, the court referred to Southway v. Cent. Bank of Nigeria, 198 F.3d 1210, 1216 (10^th Cir. 1999). The 10^th Circuit held in Southway that the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) was enforceable against a foreign state by virtue of an exception contained in the Foreign Sovereign Immunities Act of 1976.

The Rux case arose from the October 12, 2000, terrorist bombing of the American warship U.S.S. Cole during a temporary refueling stop in the Port of Aden, Yemen, in which seventeen American sailors were killed.  Plaintiffs, consisting of more than fifty surviving family members of the deceased sailors, allege that Defendant Republic of Sudan was liable for damages from the attack because it provided material support and assistance to Al Qaeda, the terrorist organization whose operatives planned and carried out the attack. Plaintiffs brought their action pursuant to the Foreign Sovereign Immunities Act, which establishes subject matter jurisdiction for personal injury or death resulting from acts of state-sponsored terrorism. Upon evidence adduced at a non-jury trial before this Court on March 13-14, 2007, the Court awarded judgment in favor of the plaintiffs in the total amount of $7,956,344.

As I have noted in previous posts, although some state racketeering acts provide a cause of action arising out of personal injuries, federal RICO does not. So, unlike in the Rux case, in order to recover damages under the federal civil RICO statute, a plaintiff must prove injury to his business or property “by reason of a violation of section 1962” of RICO. But, damage to business or property is often a result of terrorist criminal acts. Consequently, RICO may provide a remedy for those persons who suffer such losses because of terrorist activity, if the facts fit one of the exceptions in Foreign Sovereign Immunities Act of 1976.

• Print
• Comments
• Trackbacks

Federal prosecutors announced they plan to seek a "superseding" indictment soon, meaning more charges and defendants are possible and that additional details about the case could become public. Word has it that the new indictment will include charges of violations of RICO. RICO Law Blog predicts that Vick and associates will also be facing civil RICO in the not to distant future. Although the civil RICO cases will be hard to make because of the requirement that the plaintiff suffer injury to his business or property by reason of the violations of RICO. Since betting on dog fights is illegal, the losing gamblers would not likely find a sympathetic judge’s ear in federal court.

However, much more likely, are civil RICO lawsuits against the NBA and Tim Doughty, the alleged fixer referee who may owe the Columbo family big bucks.

• Print
• Comments
• Trackbacks

Douglas M. Jennings designed an aftermarket dashboard bezel-that is, a molded shape that fits over an automobile's instrument panel. Hoping to make money from his design through manufacturing and selling his bezels in the auto parts aftermarket and to forestall copycats, Jennings applied to the U.S. Patent and Trademark Office (“PTO”) for a patent. As part of her review of Jennings's application, the patent Examiner contacted defendants Auto Meter Products, Inc., Gauge Works, LLC, and Gregory Day to inquire whether the bezel they were selling was on sale or publicly available before Jennings applied for his patent. Jennings believes that the defendants, in response to the Examiner's inquiries, fraudulently misled her into believing that Jennings was not in fact the inventor of the bezel.

In addition to continuing to pursue his patent application, Jennings filed a civil lawsuit against the defendants under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). RICO fit the bill, in Jennings's opinion, because the defendants were engaged in “the type of unfair competition that one would expect from a Mafia family or narcotics cartel.” His complaint alleged that the defendants had commandeered the PTO through a pattern of racketeering activity by flooding it (via mail and wire transmissions) with false information in order to deny Jennings a patent and thereby “exploit the market for the bezel without compensating Jennings for use of his invention.”

Unfortunately for Mr. Jennings, neither William T. Lawrence, Magistrate Judge, sitting in the United States District Court for the Southern District of Indiana, nor the United States Court of Appeals for the Seventh Circuit bought his pitch.

Although plaintiffs continue to amaze me with their “innovative” theories, nearly all courts are unreceptive to RICO being "commandeered" to gain leverage in ordinary commercial disputes. See the Seventh Circuit’s opinion at Jennings v. Auto Meter Products, Inc., 2007 WL 2120337 (C.A.7 (Ind.).

• Print
• Comments
• Trackbacks

Carissa Wyant of the Minneapolis / St. Paul Business Journal reported in its July 20, 2007 edition that the Minnesota Workers' Compensation Reinsurance Association and the Minnesota Workers' Compensation Insurers Association filed suit against American International Group Inc. on July 17, 2007 seeking to recover more than $100 million in damages for fraudulent actions and violations of the Federal Racketeer Influenced and Corrupt Organizations Act.

The suit filed in United States District Court for the District of Minnesota alleges that New York-based AIG understated its workers' compensation business in Minnesota for the past 22 years, in order to avoid paying part of a collective statewide fund covering large workplace injury claims. AIG representatives said the company does not comment on ongoing litigation.

The WCRA is a nonprofit association of about 600 members, which was created by the Minnesota Legislature in 1979 to supply reinsurance to all insurers and self-insurers in Minnesota. This reinsurance is used to pay catastrophic workers' compensation claims to injured Minnesota workers.

RICO Law Blog will keep an eye on this one. AIG will likely make a motion to dismiss under Federal Rule 12(b)(6) within the next few weeks.

• Print
• Comments
• Trackbacks

For some reason pro se litigants (persons representing themselves) are attracted to RICO. My informal survey indicates that dozens of frivilous RICO claims are filed in state and federal courts each year. They almost always result in dismissal, with prejudice, at the very early stages of the lawsuit – mostly for failure to state a claim for which relief can be granted. As noted in my previous posts, pleading and proving a RICO case is a daunting task, but this fact does not seem to dissuade some people with an ax to grind.  A decision entered in the United States District Court for the District of Nevada on July 5, 2007 provides an entertaining example of a person with a problem – you decide what his problem is.   The District Court’s decision in Charles Caston, et al. v. U.S. President George BUSH, Jr., et al. provides the following recitation of the relief Mr. Caston sought in his RICO lawsuit.

Charles Caston, acting pro se, has brought suit on his own behalf and on the behalf of Casinos Las Vegas, Reno. Plaintiff is suing U.S. President George Bush, Jr. [sic], Governor Gibbons, George Bush, Nancy Poloski [sic], California Governor Arnold Swartznagger [sic], Texas Governor Rick Perry, New York Governor George Pataki [sic], Vice President Dick Chaney, and Mexico's President Andres Manuel Lopex Obrador [sic] for violating his constitutional rights. Plaintiff asks the court to seize 84 Lumber, Office Depot, the Pentagon, and the White House. Plaintiff also requests the court to stop the war in Iraq and release the prisoners in Guantanamo Bay and Afghanistan.

The Court goes on to note:

Plaintiff claims that the Pentagon and the White House need to be seized because they are involved in R.I.C.O. violations and overcharging plaintiff everything he buys. Plaintiff also accuses an unspecified defendant of controlling the slot machines, breaking and entering his storage unit, taking money out of his bank account, and black mailing American Indians. Further, plaintiff claims that urine was poured on him while he slept, he is being stalked by U.S. Military personnel, and that his cousin was killed by the U.S. Military. Finally, plaintiff states that he is being denied a home, a family, a drivers license, and sex with women. Given the delusional allegations of plaintiff's Complaint, the legal and factual deficiencies cannot be cured by amendment.

Not surprisingly, the Court dismissed Mr. Caston’s complaint with prejudice. In any event, thanks, Mr. Caston, for the entertainment value of your RICO claims.

• Print
• Comments
• Trackbacks

In late June 2007, the United States Supreme Court held in Wilkie v. Robbins, 2007 WL 1804315 (U.S.) (June 25,2007), that BLM officials did not violate RICO by their cumulative and very aggressive actions to force Frank Robbins, a Wyoming guest ranch operator, to regrant the government an easement across his private land. The lengthy statement of facts included in the decision by Justice Souter defies summarization because – in the words of Justice Souter – “The substance of Robbins's claim, and the degree to which existing remedies available to him were adequate, can be understood and assessed only by getting down to the details, which add up to a long recitation.” Suffice it to say that the Court seemed to be sympathetic to Mr. Robbins, but rather half-heartedly held that he had adequate non-RICO remedies available to him -- some Robbins unsuccessfully asserted and some he didn’t claim at all.

Justice Souter framed the issues as follows: “The questions here are whether the landowner has either a private action for damages of the sort recognized in Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), or a claim against the officials in their individual capacities under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968 (2000 ed. and Supp. IV). We hold that neither action is available.”

The Tenth Circuit Court of Appeals held that Robbins had a clearly established right to be free from retaliation for exercising his Fifth Amendment right to exclude the Government from his private property, Robbins v. Wilkie, 433 F.3d 755, 765-767 (2006), and it explained that Robbins could go forward with the RICO claim because Government employees who “engag[e] in lawful actions with an intent to extort a right-of-way from [a landowner] rather than with an intent to merely carry out their regulatory duties” commit extortion under Wyoming law and within the meaning of the Hobbs Act, 18 U.S.C. § 1951.  68. The Court of Appeals rejected the defense based on a claim of the Government's legal entitlement to demand the disputed easement: “if an official obtains property that he has lawful authority to obtain, but does so in a wrongful manner, his conduct constitutes extortion under the Hobbs Act.” Id., at 769. However, the Supreme Court reversed as follows:

RICO does not give Robbins a claim against defendants in their individual capacities. Robbins argues that the predicate act for his RICO claim is a violation of the Hobbs Act, which criminalizes interference with interstate commerce by extortion, along with attempts or conspiracies, 18 U.S.C. § 1951(a), and defines extortion as “the obtaining of property from another, with his consent ... under color of official right,” § 1951(b)(2). Robbins’s claim fails because the Hobbs Act does not apply when the National Government is the intended beneficiary of allegedly extortionate acts.”

Upon review of the extensive recitation of “bad acts” by the government employees, I was left with the abiding feeling that Robbins’s RICO claims should have survived.  But, in accord with a clear trend in the federal courts, the Supreme Court is not inclined to allow a plaintiff to avail himself of RICO remedies, if there are other adequate (in the mind of the court) remedies available to the plaintiff.

• Print
• Comments
• Trackbacks

As I noted in my last post, a civil RICO plaintiff must plead and prove direct injury "by reason of" the defendant’s RICO violation. But pleading and proving direct causation may not be enough to save a plaintiff’s claim from dismissal. Section 1964(c) limits injuries to a plaintiff’s “business or property”:

Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefore . . . and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee . . . . (Emphasis added).

So, not all injuries are provided a remedy under the RICO Act. Most notably personal injuries are not compensable under RICO. As with RICO’s direct injury requirement, Courts have used the "business or property" standard as a means of promptly dismissing claims that they consider beyond the Act’s intended scope. The clear message is – Don’t bring a RICO claim in order to gain leverage in an ordinary tort case.

• Print
• Comments
• Trackbacks

Pleading and proving the specialized direct cause of injury requirement under the RICO Act is just one of many important challenges confronting plaintiffs who want to take advantage of the powerful impact a RICO claim almost always has on a defendant.

RICO’s provision for civil actions reads that --

[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.  18 U.S.C. § 1964(c). [Emphasis added.]

Unlike proximate cause in a tort case, which exists whenever a plaintiff’s injury is a reasonably foreseeable consequence of the defendant’s tortuous conduct, RICO’s “by reason of” language makes proximate cause a matter of law.  Consequently, unless properly pled, a plaintiff will find himself on the short end of a motion to dismiss and/or motion for summary judgment based on lack of causation.

In Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268 (1992), the United States Supreme Court expressly held that section 1964(c)’s language limiting civil claims to plaintiffs injured “by reason of a violation of section 1962” required civil plaintiffs to prove that their damages were “proximately caused” by the RICO violation. Thus, the plaintiff must plead and prove direct injury – meaning that no other causes could intervene between the defendant’s RICO violation and the plaintiff’s injury. As pointed out by RICO Act commentator, Jeff Grell, in Holmes, “. . . the Supreme Court encouraged lower courts to use ‘proximate cause’ as a sword to attack the abusive practice of bringing RICO claims whenever mail or wire fraud arguably occurs.”

• Print
• Comments
• Trackbacks

The Wall Street Journal Law Blog reported yesterday that Dickie Scruggs sued State Farm in federal court in Mississippi, accusing the company of engaging in a “pattern of racketeering” by manipulating engineering reports on Hurricane Katrina damage so the company could deny policyholder claims. Scruggs is already pursuing litigation against the company, but this is the first lawsuit alleging violations of the civil Racketeer Influenced Corrupt Organization Act, or RICO.  See the WSJ Blog site for a link to the 101-page complaint.

• Print
• Comments
• Trackbacks

The Journal of the American Association for Justice reported in its June 2007 issue that the Third Circuit ruled that policyholders can bring federal racketeering suits against insurers in New Jersey despite the state’s lack of provisions for private rights of action.

The decision in Weiss v. First Unum Life Ins. Co., 2007 WL 968391 (3d Cir. Apr. 3, 2007) overturned a lower court’s reverse preemption ruling and held that RICO claims are not barred by the McCarran-Ferguson Act, which prohibits any federal law that would “invalidate, impair, or supersede” state insurance law unless it specifically relates to the business of insurance.

“There is nothing in the regulatory scheme that indicates that allowing other remedies as part of its regulation of insurance would frustrate or interfere with New Jersey’s insurance regime,” Judge Marjorie Rendell wrote, concluding that RICO augments, rather than impairs, the state’s insurance law.

Richard Weiss, a former investment banker, was disabled in 2001 after a heart attack left him with permanent left ventricular dysfunction and extremely low blood pressure. He had short- and long-term disability benefits provided by First Unum through his employer at the time, Tucker Anthony Sutro. The insurer paid Weiss short-term disability benefits and then approved long-term benefits of more than $11,000 a month, but it discontinued payments after three months.

Weiss, who initially sued to recover losses under state law, added the RICO claim when First Unum moved the case to federal court, alleging that the state law claims were preempted by the Employee Retirement Income Security Act. Weiss argued that the insurer violated RICO by discontinuing his disability payments as part of its racketeering scheme to stop paying expensive claims.

The ruling expanded on the U.S. Supreme Court’s holding in Humana, Inc. v. Forsyth, in which the justices held that RICO claims would not frustrate the goals of Nevada’s insurance law. (525 U.S. 299 (1999).) The defense argued that unlike in Nevada, New Jersey insurance law neither allows a statutory private right of action for nonpayment of benefits nor specifically makes punitive damages available in these cases.

But the Third Circuit found that the remedies established in the state’s Insurance Trade Practices Act (ITPA) “are not intended to be exclusive.”

• Print
• Comments
• Trackbacks

If you’ve read my previous few posts, you may think that I hold a generally negative opinion of civil RICO. Not true! Although I am cautious and meticulous during pre-litigation investigation, once we decide to “pull the trigger” and file a case, my litigation team is relentless in pursuing it. By the time we file the complaint, we have decided that the defendant deserves to be “pulled through the knothole.” We are aggressive because we can be – we have done our homework and we know we have a good case. We have the forensic proof in hand and supported by at least one expert’s report and affidavit. This approach often overwhelms the unsuspecting defendant and his unprepared counsel.

On the other hand, if we’re defending, we undertake a thorough investigation of our own as soon as the defendant retains us.  Because of the complexity of defending civil RICO claims, most experienced lawyers require a large retainer to support an early concentration of efforts, including engaging one or more experts. Since the linchpin of a RICO claim is damage, most cases require us to hire a forensic accountant or certified fraud examiner right out of the starting blocks. From day one, we commit to a tenacious discovery effort. Delay in launching comprehensive discovery is not an option. Work must commence immediately to marshal the facts and law necessary to move for dismissal of the case at the earliest possible time. The defendant’s reputation is at stake and, as his counsel we must make every effort get the RICO claims dismissed as soon as possible. Then, we can concentrate on defending against the other claims, if any.  If our motion to dismiss is not granted, then our efforts shift to eliminating the RICO claims on summary judgment. Sometimes, we file a motion to dismiss for failure to state a claim and a motion for summary judgment at the same time. This gives the judge an opportunity to learn a lot about the facts and applicable defenses very early in the case.

Of course, while we are working our defense we expect that a well-prepared plaintiff’s lawyer will already have his opposition to our motion to dismiss and motion for summary judgment ready to go.

RICO lawsuits are demanding, exciting, and exhausting for both sides. Lawyers and their clients engaged in these cases better be prepared for the sting of battle – they better “. . . love the smell of napalm in the morning. . . .” ala Robert Duvall, Lt. Col. Bill Kilgore, in Apocalypse Now --

Kilgore: Smell that? You smell that?
Lance: What?
Kilgore: Napalm, son. Nothing in the world smells like that.
[kneels]
Kilgore: I love the smell of napalm in the morning.

There is usually plenty of fire, heat and devastation in a RICO lawsuit.

• Print
• Comments
• Trackbacks

There are four substantive liability sections in the RICO Act: 18 U.S.C. 1962(a) through (d). Each of these sections shares common terms and concepts, including “racketeering”, “person”, “enterprise”, “association with the enterprise”, “pattern of racketeering activity”, “relationship among racketeering acts”, and “conducting the enterprise through a pattern of racketeering”. These terms have been discussed in previous posts and will be addressed in the next weeks and months.   However, I want to touch on conspiracy in this post. Conspiracy is specifically covered in the RICO Act.

Subsection 1962(d) makes it unlawful for any person to conspire with any other person to violate Subsections 1962(a), (b) or (c). As I have mentioned in my previous posts, a RICO claim is broad, but a RICO conspiracy claim is even broader. In a RICO conspiracy it is the agreement by a defendant that is necessary for liability. So, a defendant can be engage in a conspiracy even if he does not commit the substantive acts that could constitute violations of Subsections (a), (b) and (c) of Section 1962. An agreement to commit the acts is all that’s needed.

Unlike the general federal conspiracy statute, a RICO conspiracy does not even require proof of an overt act. A conspirator need only intend to further a venture which, if completed, would satisfy all elements of a civil RICO claim. Although very broad the RICO conspiracy statute is not limitless and its interpretation and application are – like most of RICO – loaded with nuances. Many courts require that a RICO conspiracy claim be pled with specificity. So, a careful review of the cases dealing with RICO, including Salinas v. U.S., 522 U.S. 52, 118 S.Ct. 469 (1997) is mandatory.