Because civil RICO is both a powerful and complicated tool for recovering damages and attorney fees, the next several Blog Entries will be dedicated to further exploring the circumstances under which you can proceed with a civil RICO case. (For a brief introduction to civil RICO see my blog entry dated October 6, 2009.) Civil RICO claims are provided for in both state and federal statutes, which may differ. This blog entry will focus on RICO claims under the federal statute at 18 U.S.C. 1962(c).
To state a civil RICO claim, the plaintiff must allege that a “person” engaged in (1) “conduct,” (2) of an “enterprise” (3) through a “pattern”; (4) of “racketeering activity.” Camiolo v. State Farm, 334 F.3d 345 (3rd Cir. 2003). Each of the words or phrases in quotes must be understood in terms of definitions in the statute (if available) and in terms of definitions provided by the courts. The statute provides that the “person” (i.e. the defendant) can be “any individual or entity capable of holding a legal or beneficial interest in property.” 18 U.S.C. 1961(3). The term “enterprise” includes any individual, partnership, corporation, association, or other legal entity.” (18 U.S.C. §1961(4).) The enterprise “may be comprised of only defendants, or of defendants and non-defendants.” (U.S. v. Urban, 404 F.2d 754 (3rd Cir. 2005). It may be an association-in-fact, as opposed to a formal legal entity. Although there can be overlap between the defendant and the enterprise, they cannot be one in the same. Cedric Kushner Promotions v. King, 533 U.S. 158 (2001). This is part of what is referred to as the “distinctiveness requirement” in a RICO cause of action.
The above distinctiveness requirement is easily met if the RICO enterprise consists of more than one legal entity, or legal entities separate from the legal entity that is the enterprise. For example the RICO defendants can be all the partners of a RICO enterprise partnership. On the other hand, a RICO enterprise cannot consist of a RICO defendant corporation and its own employees. However the enterprise could consist of the defendant corporation and its network of independent, non-exclusive, agents. Likewise, a RICO enterprise can consist of a defendant corporation and its outside (but not in house) attorneys.
The take away from this blog entry is that the person/defendant distinction must be well understood to identify situations where civil RICO claims are appropriate. From the defendant’s perspective, it should also be understood to properly challenge RICO claims that should never have been brought.
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.
Wednesday, January 27, 2010
Friday, January 15, 2010
Attorney Fee Recovery Under the Contractor and Subcontractor Payment Act
The Contractor and Subcontractor Payment Act (the “CSPA,” at 73 P.S.A. 501-516) applies to any construction project in Pennsylvania, excepting residential projects involving six or fewer units. It is intended to assure contractors prompt payment from owners, and subcontractors prompt payment from contractors and other subcontractors. It leaves substantial room for owners and contractors to reach their own payment arrangements, but lends additional enforcement teeth to those arrangements. When the prompt payment provisions (which allow for good faith disputes) are not met, and the matter goes to litigation, the substantially prevailing party is entitled to attorney fees.
Notwithstanding any agreement to the contrary, the substantially prevailing party in a proceeding to recover payment under this act shall be awarded a reasonable attorney fee in an amount to be determined by the court or arbitrator, together with expenses.
(73 P.S.A. 512(b), emphasis added.) As plainly set forth in the Act, the availability of this remedy cannot be contracted away.
It is, of course, possible for neither party to be “substantially prevailing.” This could happen, for example, where the plaintiff alleges that the defendant withheld $4 million in bad faith, and the court holds that only $1 million was withheld in bad faith. The plaintiff could be said to not have substantially prevailed because the majority of the disputed amount was found to have been withheld in good faith; and, the defendant could be said to not have substantially prevailed because it withheld $1 million in bad faith.
However, where the court does find that one of the parties substantially prevailed, reasonable attorney fees will be recoverable not only for the CSPA claim itself, but for any efforts reasonably expended to collect on the judgment, which in the case of a defendant’s victory could be the attorney fees required to collect attorney fees under the CSPA.
In that regard, note the “any proceeding to recover any payment” language in the Act, as contrasted with language that might read “any proceeding arising under the statute.” Although one might argue that either provision requires an award of attorney fees in the post judgment collection phase, the Pennsylvania courts have expressly held that the former language has that effect. Therefore, it pays to look for distinctions of this kind generally when evaluating attorney fee recovery provisions, and to be conscious of the distinction when writing your own provisions into contracts.
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.
Notwithstanding any agreement to the contrary, the substantially prevailing party in a proceeding to recover payment under this act shall be awarded a reasonable attorney fee in an amount to be determined by the court or arbitrator, together with expenses.
(73 P.S.A. 512(b), emphasis added.) As plainly set forth in the Act, the availability of this remedy cannot be contracted away.
It is, of course, possible for neither party to be “substantially prevailing.” This could happen, for example, where the plaintiff alleges that the defendant withheld $4 million in bad faith, and the court holds that only $1 million was withheld in bad faith. The plaintiff could be said to not have substantially prevailed because the majority of the disputed amount was found to have been withheld in good faith; and, the defendant could be said to not have substantially prevailed because it withheld $1 million in bad faith.
However, where the court does find that one of the parties substantially prevailed, reasonable attorney fees will be recoverable not only for the CSPA claim itself, but for any efforts reasonably expended to collect on the judgment, which in the case of a defendant’s victory could be the attorney fees required to collect attorney fees under the CSPA.
In that regard, note the “any proceeding to recover any payment” language in the Act, as contrasted with language that might read “any proceeding arising under the statute.” Although one might argue that either provision requires an award of attorney fees in the post judgment collection phase, the Pennsylvania courts have expressly held that the former language has that effect. Therefore, it pays to look for distinctions of this kind generally when evaluating attorney fee recovery provisions, and to be conscious of the distinction when writing your own provisions into contracts.
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, January 8, 2010
Attorney Fee Recovery and the Federal Consumer Credit Transaction Laws
The federal consumer credit protection code, at 15 U.S.C. 1640(a)(3), provides for attorney fees as part of the recoverable amount for any violation of Parts B, D, or E of Subsection I of the code. (These code sections are parts of what is referred to as the Truth in Lending Act.) Part B deals with disclosures in consumer credit transactions and runs from 1631 to 1651. Part D deals with credit billing and runs from 1666 to 1666j. Part E deals with Consumer Leases and runs from 1677 to 1677f.
Although granting attorney fee to a prevailing plaintiff is mandatory, the court has discretion as to the amount of fees awarded. That said, courts have acknowledged that the purpose for awarding attorney fees is to make the plaintiff whole and encourage private enforcement actions. Attorney fees are quantified based on a reasonable hourly rate and a reasonable number of hours for work necessary to plaintiff’s representation. Plaintiff’s actual obligation to pay the fee is not a factor. Since a Plaintiff might be found to have prevailed on its action even where a cases settles, defendants should make sure settlements specifically address the attorney fee issue.
Things that can put a business at risk under the above laws (and this is a very abbreviated list) include:
(1) Failing to adhere to the ways in which certain kinds of disclosures need to be labeled and formatted (15 U.S.C 1632).
(2) Failing to properly disclose the consumer’s right to rescind a consumer credit transaction within three days of its formation (15 U.S.C. 1635).
(3) Violating the disclosure requirements associated with an open ended consumer credit plan (including with respect to solicitations, opening accounts, renewing accounts, changing terms/rates, and furnishing statements, (15 U.S.C. 1637), with additional rules if the plan is secured by the consumer’s principal dwelling (15 U.S.C. 1637(a)).
(4) Violating the disclosure requirements associated with a non-open ended consumer credit transaction (15 U.S.C. 1638), with other specific disclosure requirements for certain mortgages (15 U.S.C. 1639).
(5) Violating the disclosure requirements associated with reverse mortgages (15 U.S.C. 1648).
(6) Violating the rules governing the handling of alleged billing errors. (15 U.S.C. 1066).
(7) Violating the rules governing the return of credit balances (15 U.S.C. 1066(d)).
(8) Violating the prohibition against credit card tie in services (15 U.S.C. 1666(g)).
(9) Violating the prohibition against offsets to pay credit card debt (15 U.S.C. 1666(h)).
(10) Failing to adhere to rules governing rate increases and amortization for credit card accounts (15 U.S.C. 1666(i)).
(11) Violating the rules governing disclosures in a consumer lease (15 U.S.C. 1667(a)).
(12) Violating the rules governing consumer liability at the termination of a lease (15 U.S.C. 1667(b)).
(13) Violating the rules governing disclosures in advertisements for consumer leases (15 U.S.C. 1677(c)).
Violations of the consumer credit protection code carry statutory penalties in addition to actual damages. Such penalties, including liability for the plaintiff’s attorney fees, can be triggered by unintentional violations even where the plaintiff has not incurred any actual damage. Moreover, violations may be the product of faulty procedures applied systematically across many transactions, making great fodder for class actions—especially if the class does not have to dilute their recovery to pay attorney fees.
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.
Although granting attorney fee to a prevailing plaintiff is mandatory, the court has discretion as to the amount of fees awarded. That said, courts have acknowledged that the purpose for awarding attorney fees is to make the plaintiff whole and encourage private enforcement actions. Attorney fees are quantified based on a reasonable hourly rate and a reasonable number of hours for work necessary to plaintiff’s representation. Plaintiff’s actual obligation to pay the fee is not a factor. Since a Plaintiff might be found to have prevailed on its action even where a cases settles, defendants should make sure settlements specifically address the attorney fee issue.
Things that can put a business at risk under the above laws (and this is a very abbreviated list) include:
(1) Failing to adhere to the ways in which certain kinds of disclosures need to be labeled and formatted (15 U.S.C 1632).
(2) Failing to properly disclose the consumer’s right to rescind a consumer credit transaction within three days of its formation (15 U.S.C. 1635).
(3) Violating the disclosure requirements associated with an open ended consumer credit plan (including with respect to solicitations, opening accounts, renewing accounts, changing terms/rates, and furnishing statements, (15 U.S.C. 1637), with additional rules if the plan is secured by the consumer’s principal dwelling (15 U.S.C. 1637(a)).
(4) Violating the disclosure requirements associated with a non-open ended consumer credit transaction (15 U.S.C. 1638), with other specific disclosure requirements for certain mortgages (15 U.S.C. 1639).
(5) Violating the disclosure requirements associated with reverse mortgages (15 U.S.C. 1648).
(6) Violating the rules governing the handling of alleged billing errors. (15 U.S.C. 1066).
(7) Violating the rules governing the return of credit balances (15 U.S.C. 1066(d)).
(8) Violating the prohibition against credit card tie in services (15 U.S.C. 1666(g)).
(9) Violating the prohibition against offsets to pay credit card debt (15 U.S.C. 1666(h)).
(10) Failing to adhere to rules governing rate increases and amortization for credit card accounts (15 U.S.C. 1666(i)).
(11) Violating the rules governing disclosures in a consumer lease (15 U.S.C. 1667(a)).
(12) Violating the rules governing consumer liability at the termination of a lease (15 U.S.C. 1667(b)).
(13) Violating the rules governing disclosures in advertisements for consumer leases (15 U.S.C. 1677(c)).
Violations of the consumer credit protection code carry statutory penalties in addition to actual damages. Such penalties, including liability for the plaintiff’s attorney fees, can be triggered by unintentional violations even where the plaintiff has not incurred any actual damage. Moreover, violations may be the product of faulty procedures applied systematically across many transactions, making great fodder for class actions—especially if the class does not have to dilute their recovery to pay attorney fees.
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.
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