This blog entry continues my discussion of the circumstances under which you may procede with a civil RICO suit. As discussed in prior entries, civil RICO provides for, among other things, the recovery of attorney fees.
Where the alleged RICO enterprise is not a legal entity, but an association-in-fact, plaintiff must show: (1) that there exists or existed an organization, whether formal or informal; (2) that the various associates of the organization function or functioned as a continuing unit; and (3) that the organization has or had an existence separate and apart from the pattern of racketeering activity. Such an enterprise need not have a chain of command. It may make its decisions on an ad hoc basis, by any number of methods, including general consensus. The requirement that the organization (i.e. the RICO enterprise) have an existence apart from the pattern of racketeering activity simply means that the alleged enterprise must: (1) be more than an association of individuals conducting the normal business functions of a corporation; and (2) have some level of existence beyond what is necessary to engage in the alleged acts of racketeering. However, it is not necessary that the enterprise have any function wholly unrelated to the racketeering activity.
Because the rules that require pleading the organization’s identity, its mode of functioning, and its existence apart from the racketeering activity appear more onerous than they are, defendants often attack the adequacy of plaintiff’s pleadings on those specific requirements. However, where a true association-in-fact exists, there is usually a basis for at least tentatively asserting enough about how it operates to get past this defense. Of course, if the plaintiff does not have sufficient facts to allege these requirements, defendant’s counsel should waste no time moving for a quick dismissal.
For authorities supporting the above discussion, see e.g., Boyle v. United States, 129 S.Ct. 2237, 2245 (2009); United States v. Turkette 452 U.S. 576, 583 (1981); United States v. Console, 13 F.3d 641, 651-651 (3rd Cir. 1993).
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.
Showing posts with label Civil RICO. Show all posts
Showing posts with label Civil RICO. Show all posts
Monday, February 8, 2010
Wednesday, January 27, 2010
A Closer Look at Civil RICO: the Person/Enterprise Distinction
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.
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.
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.
Subscribe to:
Posts (Atom)