Civil RICO Lawsuits
The law that enables the federal government to prosecute organized crime bosses allows regular people to sue people and entities that engage in similar behavior. Many plaintiffs use this law to sue people, seeking large cash payments, a reason to claim federal court jurisdiction, and substantial media attention. These claims need not be limited to mafia activity; they frequently arise from commercial transactions. But it is very hard to succeed on a civil RICO claim.
Why should you read this post about civil RICO claims?
You are the defendant in a civil RICO claim but you are confused since you are not in the mob.
You want to sue someone for a complex series of frauds and want to know how many plaintiffs do it.
You want to learn about a law that requires you to learn about several other predicate laws.
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The Elements of a Civil RICO Claim
The federal RICO statute is 18 USC 1962. It is in Chapter 18 of the federal code since it is a criminal offense, but it does allow a “private right of action” that lets regular people bring a lawsuit alleging a violation. There are also state RICO laws, like Penal Law 460.20 in New York and Penal Code 186 in California, but this post will discuss the federal statute.
It prohibits making money from, owning, participating in, or conspiring with an “enterprise” that engages in a “pattern” of “racketeering activity.”
These are specific terms that have strict requirements and, while plaintiffs are often eager to compare a defendant to a criminal organization, it is often much harder to establish that their lawsuit meets the strict requirements to plead these elements.
For example, an enterprise must be different from the defendant. Just like an individual mobster is distinct from the mob, a plaintiff must allege that the defendant is distinct from the “enterprise” at issue in the lawsuit. Next, a “pattern” means at least two actions within ten years of each other. And “racketeering activity” means the violation of one of a number of specific criminal laws that constitute “predicate acts,” such as wire fraud or a violation of the Travel Act. Therefore, to allege a RICO violation, a plaintiff must also allege multiple violations of predicate laws.
Civil RICO Claims Often Fail
RICO claims fail a lot because they attract a lot of plaintiffs but require such technical expertise that most lawyers do a poor job of asserting them. Also they are particularly appealing as a last resort for claims that could not succeed in a more straightforward claim.
One major appeal for a civil RICO claim is treble damages. Whereas a regular fraud claim may enable a plaintiff tor recover her loss, a civil RICO claim may enable her to recover triple. As a result, lawyers who want big payouts are attracted to the claim. And since civil RICO does not have an analogue in many other jurisdictions, many plaintiffs abroad try to find ways to make their foreign disputes violations of the American RICO law to get damages in the United States they could not get elsewhere.
RICO may also help plaintiffs assert claims that had expired under the statute of limitations. Because a “pattern” can extend back ten years, a claim that is older than a five year limit for fraud claims may still be actionable under RICO.
Accordingly, RICO attracts claims by plaintiffs who want a lot of money and who may have weak ties to the United States and old claims. From the start, defendants may have strong arguments for why these claims are cash grabs and not serious violations of the law. Then, since pleading these claims correctly requires a good deal of technical expertise that many lawyers do not possess (and since there is a lot of case law defendants can cite, dismissing similar weak claims), civil RICO claims often fail.
Civil RICO Claims Sometimes Succeed
Civil RICO claims do not always fail. They succeed in two ways.
First, many skilled lawyers do persuade the court that they have properly pled a civil RICO claim. This is hard to do, but it does happen when the lawyers take the pleading requirements seriously and have facts that comport with the legal requirements.
And two, for many, the goal of litigation is not always to prevail at trial, but to provoke a settlement or get publicity. RICO claims frequently get headlines and that may be enough to get litigants to settle rather than pay for the kinds of lawyers who can handle a complex lawsuit and to be exposed to the liability associated with an RICO claim.