In my last Blog entry, I mentioned that Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (the “CPL”) offered relief, including an award of attorney fees, in the event a consumer suffers damages as the result of any of 21 wrongful acts that are listed in the statute. In this Blog entry, I briefly summarize what those acts are. For the sake of brevity, I combined certain of the acts and paraphrased the language in the statute. To determine exactly what protections are afforded under the statute you should, of course, consult an attorney. That said, here is my abbreviated list of the wrongs for which consumers can seek redress under Pennsylvania’s CPL:
1) Deceiving the consumer as to the identity of the maker or provider of the goods or services, or as to the identity of persons or entities affiliated with or endorsing the goods or services, or with respect to the geographic origin of the goods or services.
2) Passing off new or refurbished goods as new.
3) Advertising goods of services with an intent to not sell them as advertised (including an undisclosed limitation of the quantity available at the advertised price or terms).
4) Disparaging another’s goods or services through false or misleading representations.
5) Making any other false claim about the nature or benefits of goods or services.
6) Offering future credits, at the time of a sale, for bringing in additional buyers following the sale.
7) Facilitating Chain Letter or Pyramid Schemes.
8) Not honoring a guarantee or warranty.
9) Knowingly misrepresenting the need for services, replacements or repairs.
10) Making improvements, repairs or replacements that are of lesser quality than agreed to in writing.
11) Making telephone solicitations that do not properly identify the caller, the purpose of the call, the thing being offered and, if the is an opportunity to win a prize, the fact that no purchase is required to be eligible to win the prize.
12) Offering any contract that includes a clause whereby the consumer gives up the right to assert a defense.
13) Soliciting mail or phone sales without reasonably believing that it can ship anything purchased to the buyer when promised or, if no promise is given, within 30 days.
14) Making any misleading representations or omissions conserving rustproofing with respect to the sale of new automobiles.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Friday, October 30, 2009
Tuesday, October 27, 2009
Consumer Protection Laws
It is quite possible for a matter to be too complex for a plaintiff to pursue it without an attorney, too small (in terms of the possible recovery) to justify an attorney taking the case on a contingent fee basis, and too large for the plaintiff to not be seriously affected by the loss.
To help alleviate this situation, at least with respect to disputes arising from consumer transactions, many states have enacted general consumer protection laws. The law serving this purpose in Pennsylvania is the Unfair Trade Practices and Consumer Protection Law, (the “CPL”). Among other things, the CPL provides that, when a person “purchases or leases goods or services primarily for personal, family or household purposes” and suffers a loss for one of 21 specific reasons listed in the statute, that person will receive an award of damages of at least $100 (even if actual damages are less, and without an upper limit if damages are more) and may receive an adjustment to the award of up to 3 times damages and “costs and reasonable attorney’s fees.”
In determining how much attorney’s fees are reasonable, the court considers: (1) the magnitude of the effort and skill required to properly conduct the case; (2) the customary charges for similar services by other attorneys it the area; (3) the amount at stake and the benefit resulting to client; and (4) the risk taken in pursuit of the case. In balancing these factors, it has been found by Pennsylvania courts that attorney’s fees of between 11 and 12 times actual damages can be reasonable. However, Pennsylvania courts have also found attorney’s fees of between 3 and 4 times damages to be unreasonable. It all depends on the facts and circumstances of the case and on how the court works through the above factors
When balancing the four factors, courts will look more kindly on a large fee request where plaintiff has actually paid the fees and seeks reimbursement. Courts will typically be less generous where the fee was contingent, with the fees only being paid to the extent they could be recovered under the CPL. Though the contingent nature of an attorney’s fee does not make it unrecoverable, it will draw closer scrutiny from the court. It should also be noted that the court will reduce an award of attorney fees proportionately by the amount of effort the attorney spent pursuing legal theories outside of the CPL.
Finally, as you might have noticed, attorney fees under the CPL go to the prevailing plaintiff, not the prevailing defendant. If a prevailing defendant wants to pursue the costs of defense, it will have to look elsewhere for the authority to do so. Possibilities include: statutes, common law and rules governing claims made in bad faith, abuse of civil process and, if applicable, the express terms of an underlying contract.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
To help alleviate this situation, at least with respect to disputes arising from consumer transactions, many states have enacted general consumer protection laws. The law serving this purpose in Pennsylvania is the Unfair Trade Practices and Consumer Protection Law, (the “CPL”). Among other things, the CPL provides that, when a person “purchases or leases goods or services primarily for personal, family or household purposes” and suffers a loss for one of 21 specific reasons listed in the statute, that person will receive an award of damages of at least $100 (even if actual damages are less, and without an upper limit if damages are more) and may receive an adjustment to the award of up to 3 times damages and “costs and reasonable attorney’s fees.”
In determining how much attorney’s fees are reasonable, the court considers: (1) the magnitude of the effort and skill required to properly conduct the case; (2) the customary charges for similar services by other attorneys it the area; (3) the amount at stake and the benefit resulting to client; and (4) the risk taken in pursuit of the case. In balancing these factors, it has been found by Pennsylvania courts that attorney’s fees of between 11 and 12 times actual damages can be reasonable. However, Pennsylvania courts have also found attorney’s fees of between 3 and 4 times damages to be unreasonable. It all depends on the facts and circumstances of the case and on how the court works through the above factors
When balancing the four factors, courts will look more kindly on a large fee request where plaintiff has actually paid the fees and seeks reimbursement. Courts will typically be less generous where the fee was contingent, with the fees only being paid to the extent they could be recovered under the CPL. Though the contingent nature of an attorney’s fee does not make it unrecoverable, it will draw closer scrutiny from the court. It should also be noted that the court will reduce an award of attorney fees proportionately by the amount of effort the attorney spent pursuing legal theories outside of the CPL.
Finally, as you might have noticed, attorney fees under the CPL go to the prevailing plaintiff, not the prevailing defendant. If a prevailing defendant wants to pursue the costs of defense, it will have to look elsewhere for the authority to do so. Possibilities include: statutes, common law and rules governing claims made in bad faith, abuse of civil process and, if applicable, the express terms of an underlying contract.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Friday, October 23, 2009
Example: Attorney Fee Liability for Overreaching in Counterclaim
In today’s Blog entry, we take a look at a situation where the defendants were successful in having the plaintiff’s case dismissed, but nevertheless face liability for plaintiff’s attorneys’ fees because the court found their counterclaim to be frivolous.
Plaintiff sued her attorneys for legal malpractice over the handling of her medical malpractice case. Her former attorneys responded with a counterclaim seeking reimbursement of the $6,000 they spent pursuing plaintiff’s medical malpractice case.
The court dismissed plaintiff’s action because she waited to long to sue and missed the deadline for commencing her suit that was specified in the relevant statute of limitations. The defendants were not entirely off the hook, however, because of their counterclaim. That counterclaim was based on the theory that state law (in this case NY), requires that clients always be responsible for disbursements. (Disbursements are out of pocket expenses such as filing fees and other non-lawyer costs, such as copying.)
Arguably, the contingency fee agreement should have been written in such a way that the plaintiff could, at least technically, have been responsible for disbursements. In the matter before the court, however, the relevant question was not what a properly drafted retainer agreement should have said, but what the retainer agreement drafted by the defendants actually said. Looking to the plain language of the retainer agreement, the court concluded that disbursements could only be recovered by defendants if defendants achieved a recovery for plaintiff in her medical malpractice action or if the plaintiff replaced defendants as counsel. Since there was no recovery in the medical malpractice case, and since plaintiff never replaced defendants as counsel in that case, there was no contractual right to disbursements in the retainer agreement.
The court further found that, because defendants were sophisticated plaintiffs attorneys, they should be treated as though they were aware that their counterclaims were unsupportable in light of the retainer agreement that they drafted. That rendered their counterclaim “nonsensical and frivolous” and paved the way for a recovery of attorney fees, associated with the defense of the counterclaim, by the plaintiff.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Plaintiff sued her attorneys for legal malpractice over the handling of her medical malpractice case. Her former attorneys responded with a counterclaim seeking reimbursement of the $6,000 they spent pursuing plaintiff’s medical malpractice case.
The court dismissed plaintiff’s action because she waited to long to sue and missed the deadline for commencing her suit that was specified in the relevant statute of limitations. The defendants were not entirely off the hook, however, because of their counterclaim. That counterclaim was based on the theory that state law (in this case NY), requires that clients always be responsible for disbursements. (Disbursements are out of pocket expenses such as filing fees and other non-lawyer costs, such as copying.)
Arguably, the contingency fee agreement should have been written in such a way that the plaintiff could, at least technically, have been responsible for disbursements. In the matter before the court, however, the relevant question was not what a properly drafted retainer agreement should have said, but what the retainer agreement drafted by the defendants actually said. Looking to the plain language of the retainer agreement, the court concluded that disbursements could only be recovered by defendants if defendants achieved a recovery for plaintiff in her medical malpractice action or if the plaintiff replaced defendants as counsel. Since there was no recovery in the medical malpractice case, and since plaintiff never replaced defendants as counsel in that case, there was no contractual right to disbursements in the retainer agreement.
The court further found that, because defendants were sophisticated plaintiffs attorneys, they should be treated as though they were aware that their counterclaims were unsupportable in light of the retainer agreement that they drafted. That rendered their counterclaim “nonsensical and frivolous” and paved the way for a recovery of attorney fees, associated with the defense of the counterclaim, by the plaintiff.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Tuesday, October 20, 2009
Attorney Fee Recovery Under Rules of Civil Procedure
The Federal Rules of Civil Procedure, as well as the procedural rules of many states, set forth provisions by which attorney fees can be recovered in the event of misbehavior.
In the federal rules, the primary provision of this kind is set forth in Rule No. 11, which states that every presentation to the court of a “pleading, written motion, or other paper” carries with it a certification that the person submitting it, after a “reasonable inquiry,” believes that: (1) the submission is not for an improper purpose such as harassment, delay, or increasing the cost of litigation; (2) the legal basis for the submission is not frivolous; and (3) all factual allegations are based on evidence or a reasonable belief that evidence will be forthcoming (and/or, in the case of a denial of a factual allegation, a reasonable belief or lack of information).
If a party believes it has been subjected to a filing that violates the above certification at any stage of the litigation, it may file a motion seeking sanctions. (There is no need to file a separate action.) Unlike most motions, the motion for sanctions must be presented to the other side 21 days before it is presented to the court. If, in that time, the opposing side withdraws the offending submission, the motion for sanctions becomes moot.
If the offending party does not withdraw its submission, it can be sanctioned in whatever amount the court deems proper as a deterrent against similar actions in the future. In addition to a sanction paid to the court, the offending party can be ordered to reimburse the movant for all attorney fees and related expenses cause by the underlying offending submission, including the fees and costs incurred in filing the motion for sanctions.
Motions for Rule 11 sanctions (and similar motions provided for in state courts), should not be filed lightly. Parties that file such motion and lose can, under the same rules, be made to pay the attorney’s fees of the prevailing side.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
In the federal rules, the primary provision of this kind is set forth in Rule No. 11, which states that every presentation to the court of a “pleading, written motion, or other paper” carries with it a certification that the person submitting it, after a “reasonable inquiry,” believes that: (1) the submission is not for an improper purpose such as harassment, delay, or increasing the cost of litigation; (2) the legal basis for the submission is not frivolous; and (3) all factual allegations are based on evidence or a reasonable belief that evidence will be forthcoming (and/or, in the case of a denial of a factual allegation, a reasonable belief or lack of information).
If a party believes it has been subjected to a filing that violates the above certification at any stage of the litigation, it may file a motion seeking sanctions. (There is no need to file a separate action.) Unlike most motions, the motion for sanctions must be presented to the other side 21 days before it is presented to the court. If, in that time, the opposing side withdraws the offending submission, the motion for sanctions becomes moot.
If the offending party does not withdraw its submission, it can be sanctioned in whatever amount the court deems proper as a deterrent against similar actions in the future. In addition to a sanction paid to the court, the offending party can be ordered to reimburse the movant for all attorney fees and related expenses cause by the underlying offending submission, including the fees and costs incurred in filing the motion for sanctions.
Motions for Rule 11 sanctions (and similar motions provided for in state courts), should not be filed lightly. Parties that file such motion and lose can, under the same rules, be made to pay the attorney’s fees of the prevailing side.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Thursday, October 15, 2009
Abuse of Process
Abuse of Process is the name for a common law tort that provides many of the remedies of a Dragonetti type statute, but which can be applied with greater flexibility. Unlike relief through the Dragonetti Act (see Blog entry from October 8, 2009), a claim for Abuse of Process can be made, and prosecuted to conclusion, while the underlying litigation is still ongoing.
Abuse of process has been defined by Pennsylvania courts as "the use of legal process against another primarily to accomplish a purpose for which it is not designed." This use could come long after litigation has begun. So, even a plaintiff perfectly justified in initiating litigation that it ultimately wins may be called to task if, during the course of that litigation, the plaintiff employs the litigation process for a purpose the process was not intended, by law, to effect. Similarly, a defendant wrongfully dragged into court and ultimately vindicated may incur liability for abuse of process in the same way.
The improper use in an Abuse of Process case is typically a form of extortion or collateral pressure. Examples include:
Over-broad discovery demands that put trade secrets at risk being used to make the other side
negotiate something away that would not normally be within the scope of the litigation.
In a personal injury case, a petition by a defendant to appoint a guardian over an injured child to scare
the parents into settling for less.
Tactics principally designed to unnecessarily multiply the costs of litigation for the other side.
Like any tort, the party advancing an Abuse of Process Claim must be able to demonstrate harm from the action complained of. Depending on the offense, the damages, and therefore the thing recoverable, might be attorney fees and costs. Given the nature of an abuse of process claim, there can also be punitive damages and even damages for collateral harm such as emotional distress.
Knowing when and how to initiate a proper claim for abuse of process can change the dynamics, and ultimate costs, of litigation.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Abuse of process has been defined by Pennsylvania courts as "the use of legal process against another primarily to accomplish a purpose for which it is not designed." This use could come long after litigation has begun. So, even a plaintiff perfectly justified in initiating litigation that it ultimately wins may be called to task if, during the course of that litigation, the plaintiff employs the litigation process for a purpose the process was not intended, by law, to effect. Similarly, a defendant wrongfully dragged into court and ultimately vindicated may incur liability for abuse of process in the same way.
The improper use in an Abuse of Process case is typically a form of extortion or collateral pressure. Examples include:
Over-broad discovery demands that put trade secrets at risk being used to make the other side
negotiate something away that would not normally be within the scope of the litigation.
In a personal injury case, a petition by a defendant to appoint a guardian over an injured child to scare
the parents into settling for less.
Tactics principally designed to unnecessarily multiply the costs of litigation for the other side.
Like any tort, the party advancing an Abuse of Process Claim must be able to demonstrate harm from the action complained of. Depending on the offense, the damages, and therefore the thing recoverable, might be attorney fees and costs. Given the nature of an abuse of process claim, there can also be punitive damages and even damages for collateral harm such as emotional distress.
Knowing when and how to initiate a proper claim for abuse of process can change the dynamics, and ultimate costs, of litigation.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Tuesday, October 13, 2009
Attorney Fees by Contract
Given that attorney fees are not generally recoverable for breach of contract, and given that many jurisdictions do not allow for the recovery of punitive damages for breach of contract, and – above and beyond that – given the effect of the gist of the action doctrine on your chances of working a tort claim into what is otherwise an action for breach of contract (see Blog entry dated October 1, 2009), your best bet for recovering attorney fees in the event of a contract dispute is to put it in the contract.
A full description of how you might want to go about doing this is beyond a single blog entry, but a few starting considerations are listed below:
First, you should consider terms designed to reduce the overall costs of a dispute regardless of who wins. A leading mechanism for doing this is arbitration. Arbitration is a form of private dispute resolution that offers streamlined procedures and is, therefore, generally less expensive than proceeding through the court system. A drawback of arbitration is that, for most practical purposes, there are no appeals. Therefore, you are stuck with whatever the arbitrator(s) decide. For this reason, you might not want an arbitration provision in a contract that, if breached, would lead to a “bet your company” dispute.
Second, you should consider when you want liability for attorney fees (and associated expenses) to be triggered. Do you want it to trigger in the event of any breach? Just a material breach? Do you want to trigger it when a complaint is filed or an arbitration demand is made?
Third, consider interest. In a contract case for a specific sum, the winning side usually collects pre-judgment and post-judgment interest at a statutory rate (e.g. at this writing, six percent in Pennsylvania state courts). Chances are that the statutory rate will be substantially below the IRR you would seek from any significant economic investment with the risk factors associated with litigation. In the event of an action on a commercial loan, the appropriate rate may be more like the default rate. In that case, the provisions allowing for the recovery of attorney fees should be written to make it clear that the appropriate higher rate of pre-judgment and post-judgment interest applies to the attorney fee portion of the award.
Fourth, remember a clause governing award of attorney fees is typically a two edged sword. Parties entering into contracts with such clauses do not generally think that they will be the ones made to pay under them. In the event of a dispute, one of those parties is wrong. Make sure you’re willing to risk being on the paying end of whatever you agree to.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
A full description of how you might want to go about doing this is beyond a single blog entry, but a few starting considerations are listed below:
First, you should consider terms designed to reduce the overall costs of a dispute regardless of who wins. A leading mechanism for doing this is arbitration. Arbitration is a form of private dispute resolution that offers streamlined procedures and is, therefore, generally less expensive than proceeding through the court system. A drawback of arbitration is that, for most practical purposes, there are no appeals. Therefore, you are stuck with whatever the arbitrator(s) decide. For this reason, you might not want an arbitration provision in a contract that, if breached, would lead to a “bet your company” dispute.
Second, you should consider when you want liability for attorney fees (and associated expenses) to be triggered. Do you want it to trigger in the event of any breach? Just a material breach? Do you want to trigger it when a complaint is filed or an arbitration demand is made?
Third, consider interest. In a contract case for a specific sum, the winning side usually collects pre-judgment and post-judgment interest at a statutory rate (e.g. at this writing, six percent in Pennsylvania state courts). Chances are that the statutory rate will be substantially below the IRR you would seek from any significant economic investment with the risk factors associated with litigation. In the event of an action on a commercial loan, the appropriate rate may be more like the default rate. In that case, the provisions allowing for the recovery of attorney fees should be written to make it clear that the appropriate higher rate of pre-judgment and post-judgment interest applies to the attorney fee portion of the award.
Fourth, remember a clause governing award of attorney fees is typically a two edged sword. Parties entering into contracts with such clauses do not generally think that they will be the ones made to pay under them. In the event of a dispute, one of those parties is wrong. Make sure you’re willing to risk being on the paying end of whatever you agree to.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Thursday, October 8, 2009
The Dragonetti Act
Many jurisdictions have laws allowing a party that has prevailed after being wrongfully sued to sue back. In Pennsylvania the statutes that allow that are called the Dragonetti Act. (Additional relief is available through the common law and through the Rules of Civil Procedure. Those options will be discussed in future Blog entries.) Under the Dragonetti Act, you can sue someone for suing you if: (1) you have prevailed in the matter where they sued you (2) the party suing you acted in way that was grossly negligent or without probable cause; and (3) the offending action was primarily for a purpose other than the proper pursuit of a legal claim. Hopefully you’re not the victim of litigation that would give rise to a claim under this Act. However, if you are, you can recover a wide range of damages, including: (1) any harm resulting from a limitation of your use of your property or things; (2) any harm to your reputation; (3) any expenses, including reasonable attorney fees, incurred in defending against the wrongful litigation; (4) emotional distress; and (5) punitive damages where appropriate.
The Dragonetti Act made it onto this Blog because it offers the prospect of recovering attorney fees. Still, recovering attorney fees may not, in and of itself, warrant pursuing such an action. That is because, although you can recover your attorney fees on the underlying wrongful action, you cannot recover them for the Dragonetti action itself. If you were just going for attorney fees, you would have to be very confident that the expense of pursuing the Dragonetti action did not exceed the expense of the underlying litigation.
That said, circumstances that give rise to a Dragonetti action likely also give rise to one or more of the other claims for damages provided for by the Act. Although the finder of fact (the judge or jury) would have to specifically determine that it was warranted in any particular case, given the kind of wrongdoing inherent in a Dragonetti Act violation, punitive damages are often likely.
The victim’s financial ability to pursue a Dragonetti case could be an obstacle, especially if the underlying case was a serious drain on resources. However, if the case is strong, with significant damages, counsel may be available on a contingency or blended rate (smaller percent contingent fee plus significantly reduced hourly fee) basis.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
The Dragonetti Act made it onto this Blog because it offers the prospect of recovering attorney fees. Still, recovering attorney fees may not, in and of itself, warrant pursuing such an action. That is because, although you can recover your attorney fees on the underlying wrongful action, you cannot recover them for the Dragonetti action itself. If you were just going for attorney fees, you would have to be very confident that the expense of pursuing the Dragonetti action did not exceed the expense of the underlying litigation.
That said, circumstances that give rise to a Dragonetti action likely also give rise to one or more of the other claims for damages provided for by the Act. Although the finder of fact (the judge or jury) would have to specifically determine that it was warranted in any particular case, given the kind of wrongdoing inherent in a Dragonetti Act violation, punitive damages are often likely.
The victim’s financial ability to pursue a Dragonetti case could be an obstacle, especially if the underlying case was a serious drain on resources. However, if the case is strong, with significant damages, counsel may be available on a contingency or blended rate (smaller percent contingent fee plus significantly reduced hourly fee) basis.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Tuesday, October 6, 2009
Civil RICO: A First Look
The next several Blog entries will introduce causes of action or legal theories that allow for the recovery of attorney’s fees. Subsequent entries will fill in the details.
The first of these causes of action is the Racketeer Influenced and Corrupt Organizations Act (“RICO”). RICO was introduced as a federal law designed to combat organized crime. Although envisioned primarily as a criminal statute, RICO also provided private causes of action for victims of racketeering activity. As a result, plaintiffs have used RICO to address wrongs that might otherwise be difficult to remedy. The federal courts somewhat curtailed these private causes of action, noting that wide spread civil use was not the primary purpose of RICO. As a result, case law interpreting how and when individuals can employ RICO is relatively complex. That said, RICO is a well established and valuable litigation tool.
RICO makes it onto this Blog because it allows the winning plaintiff to recover of triple damages and attorneys fees.
In addition to the federal RICO statutes, many states have passed their own versions of RICO. Some are more limited than the federal version (e.g., Pennsylvania’s has no private cause of action), and some have advantages over the federal version (e.g., the N.J. RICO statute, which will be the topic of a future Blog entry).
Federal RICO is composed of six sections of the United States Code (18 U.S.C. 1961-1968). The two RICO sections this Blog will spend the most time with are 1962(c) and 1962(d). To bring a claim under 1962(c), a plaintiff must allege, among other things, that defendants conducted the affairs of an “enterprise,” through a “pattern of racketeering activity,” resulting in damage to the plaintiff. To bring a claim under 1962(d), a plaintiff must allege that defendants both agreed to commit RICO “predicate acts” and knew that those acts were part of a “pattern of racketeering activity.”
Key terms necessary to understand and apply RICO, such as “enterprise,” “racketeering activity” and “pattern of racketeering activity,” are defined, at least partially, in section 1961. To fully understand these terms, as well as critical terms not defined in the statute, and to effectively apply RICO to achieve the desired result, requires familiarity with the evolving case law in the court system where you bring the RICO claim
For purposes of this Blog entry, your take away point is this: If you have been cheated by something that looks like a legitimate business, but which really exists to separate its victims from their money through certain specific illegal schemes, you may have a RICO cause of action. If you have a RICO cause of action, you can get your attorney fees back plus three times damages.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
The first of these causes of action is the Racketeer Influenced and Corrupt Organizations Act (“RICO”). RICO was introduced as a federal law designed to combat organized crime. Although envisioned primarily as a criminal statute, RICO also provided private causes of action for victims of racketeering activity. As a result, plaintiffs have used RICO to address wrongs that might otherwise be difficult to remedy. The federal courts somewhat curtailed these private causes of action, noting that wide spread civil use was not the primary purpose of RICO. As a result, case law interpreting how and when individuals can employ RICO is relatively complex. That said, RICO is a well established and valuable litigation tool.
RICO makes it onto this Blog because it allows the winning plaintiff to recover of triple damages and attorneys fees.
In addition to the federal RICO statutes, many states have passed their own versions of RICO. Some are more limited than the federal version (e.g., Pennsylvania’s has no private cause of action), and some have advantages over the federal version (e.g., the N.J. RICO statute, which will be the topic of a future Blog entry).
Federal RICO is composed of six sections of the United States Code (18 U.S.C. 1961-1968). The two RICO sections this Blog will spend the most time with are 1962(c) and 1962(d). To bring a claim under 1962(c), a plaintiff must allege, among other things, that defendants conducted the affairs of an “enterprise,” through a “pattern of racketeering activity,” resulting in damage to the plaintiff. To bring a claim under 1962(d), a plaintiff must allege that defendants both agreed to commit RICO “predicate acts” and knew that those acts were part of a “pattern of racketeering activity.”
Key terms necessary to understand and apply RICO, such as “enterprise,” “racketeering activity” and “pattern of racketeering activity,” are defined, at least partially, in section 1961. To fully understand these terms, as well as critical terms not defined in the statute, and to effectively apply RICO to achieve the desired result, requires familiarity with the evolving case law in the court system where you bring the RICO claim
For purposes of this Blog entry, your take away point is this: If you have been cheated by something that looks like a legitimate business, but which really exists to separate its victims from their money through certain specific illegal schemes, you may have a RICO cause of action. If you have a RICO cause of action, you can get your attorney fees back plus three times damages.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Thursday, October 1, 2009
Contract v. Negligence (a difference in damages)
In many jurisdictions (Pennsylvania for example) there are no punitive damages in a straight forward breach of contract case. Nor is there fee shifting unless provided for in the contract itself. Therefore, absent contractual provisions that bear directly on the quantification of damages, the most any party can recover in a typical contract case is the amount that they lost as a reasonably immediate and foreseeable result of the breach of the contract—their attorney fees not counting as a part of that loss. In other words, any win, by either side, is at best a loss equal to the value of their legal costs.
In a negligence case, however, a winning plaintiff can also receive punitive damages which, of course, can be viewed as defraying litigation expenses. To win punitive damages, one has to prove negligence (the existence of a duty on the part of the defendant, a breach of that duty, and resulting damages) plus some aggravating factor, typically recklessness, such that the offending party should not only make the plaintiff whole, but pay an extra amount as punishment and to dissuade others from doing a similar despicable thing in the future.
This, of course, led plaintiffs to assert that not only did the defendant breach its contract, it breached the contract negligently and recklessly. In this way, plaintiffs hoped to tap into the world of punitive damages to increase the size of their recoveries in contract actions. The tactic worked for a while, but has been largely derailed by what is called the “Gist of the Action Doctrine.” That doctrine is a rule, made up and enforced by the courts, that says that if the matter complained of is essentially an action for breach of contract, then a plaintiff cannot seek a recovery through tort remedies such as negligence actions.
The express purpose of the Gist of the Action Doctrine is to keep punitive damages out of most traditional contract disputes. There are, however, certain recognized exceptions where actions are essentially both contract and tort—and a grey area—where the question is debatable. If you can fit into one of those exceptions as a plaintiff (or as a defendant through a counter-claim or cross-claim), you can still assert a claim for punitive damages and possibly recover some or all of you attorney fees. Future entries in this blog will discuss those exceptions and grey areas.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
In a negligence case, however, a winning plaintiff can also receive punitive damages which, of course, can be viewed as defraying litigation expenses. To win punitive damages, one has to prove negligence (the existence of a duty on the part of the defendant, a breach of that duty, and resulting damages) plus some aggravating factor, typically recklessness, such that the offending party should not only make the plaintiff whole, but pay an extra amount as punishment and to dissuade others from doing a similar despicable thing in the future.
This, of course, led plaintiffs to assert that not only did the defendant breach its contract, it breached the contract negligently and recklessly. In this way, plaintiffs hoped to tap into the world of punitive damages to increase the size of their recoveries in contract actions. The tactic worked for a while, but has been largely derailed by what is called the “Gist of the Action Doctrine.” That doctrine is a rule, made up and enforced by the courts, that says that if the matter complained of is essentially an action for breach of contract, then a plaintiff cannot seek a recovery through tort remedies such as negligence actions.
The express purpose of the Gist of the Action Doctrine is to keep punitive damages out of most traditional contract disputes. There are, however, certain recognized exceptions where actions are essentially both contract and tort—and a grey area—where the question is debatable. If you can fit into one of those exceptions as a plaintiff (or as a defendant through a counter-claim or cross-claim), you can still assert a claim for punitive damages and possibly recover some or all of you attorney fees. Future entries in this blog will discuss those exceptions and grey areas.
The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.
Subscribe to:
Posts (Atom)