United States: RICO - A Guide To Civil RICO Litigation In Federal Courts

I. INTRODUCTION

§ 1 Scope Note

"RICO" is the acronym for the Racketeer Influenced and Corrupt Organizations Act, codified as Title IX of the Organized Crime Control Act of 1970.¹ The full text of the key sections of the RICO statute are included in Appendix A.

With its charge of "racketeering" and its threat of treble damages and attorney's fees, RICO may seem like the blunt instrument of civil litigation. RICO's requirements of a culpable "person" who conducts the affairs of a distinct "enterprise" through a "pattern" of "racketeering" in a way that proximately causes injury can make RICO seem complex and mystifying. Adding to the perception of complexity are some historical disagreements among courts on how to interpret several key provisions of the broadlydrafted RICO statute. Our goal with this treatise is to demystify RICO by discussing the prevailing law on the elements common to all civil RICO claims and also by addressing specific issues that have most perplexed the courts and practitioners.

We have found this treatise to be a valuable resource in representing RICO plaintiffs and defendants. Section 86 below contains a checklist of essential allegations for all civil RICO claims. Counsel should review that list when deciding whether they have a RICO claim or to get ideas about how a RICO claim might be attacked.

Section 88 contains bare-bone allegations that should help counsel draft a RICO complaint. As with any civil complaint, a RICO complaint should tell a clear and compelling story. Fed. R. Civ. P. 8 requires the complaint to contain "a short and plain statement of the claim," but RICO claims that are based on mail or wire fraud also must satisfy Fed. R. Civ. P. 9(b) by stating the circumstances constituting fraud with particularity² by identifying the time, place, and content of the fraudulent communications, as well as the parties to the communications.³ The heightened pleading standards under Bell Atlantic Corp. v. Twombly⁴ and Ashcroft v. Iqbal⁵ are particularly important in RICO cases to protect defendants against baseless charges of racketeering that are serious, harmful, and expensive to defend.⁶

Section 87 contains a sample RICO Case Statement. Many federal courts or judges now require the plaintiff to file some form of RICO Case Statement at the beginning of the case. Consult your local rules and your judge's personal rules or standing orders. Even if your case is in a court that does not require a RICO Case Statement, it is good practice to fill one out whether you represent the plaintiff or the defendant. Doing so will help you identify any gaps that may exist in your case.

We offer a word of caution about defending cases where RICO claims are combined with common law claims, such as fraud or breach of fiduciary duty. There is a temptation to focus energy on defeating the RICO claims while paying less attention to the common law claims. This can be a significant mistake, especially where the common law claims allow punitive damages, which most courts have agreed are not available under RICO. Even if compensatory damages are trebled on the RICO claim, they might very well be eclipsed by a punitive damages award on the common law claims.

Similarly, plaintiffs should think carefully before playing the RICO card when the plaintiff has other common law claims arising from the same conduct. A judgment against the common law claim might very well undermine the RICO claim.

Plaintiffs also should determine whether a state RICO statute is available and should be aware that federal RICO claims themselves may be brought in state court.⁷ Unlike antitrust claims, there is not exclusive federal subject matter jurisdiction for RICO claims. Although state RICO laws are not discussed in this treatise, Appendix B lists state RICO laws.

Finally, a word about the cases cited in this treatise. Not only is RICO law constantly changing, but there often is disagreement among circuits, and even within circuits, about how to apply RICO. Although we have tried to gather the most significant recent RICO decisions from all the circuits, we certainly may have omitted decisions that may be pertinent to your case. This treatise should be used as a starting point to identify those issues that merit follow-up research before you file a RICO complaint or a motion attacking a RICO claim.

Footnotes

1 18 U.S.C. §§ 1961 to 1968.

2 Perlman v. Zell, 938 F. Supp. 1327, 1348 (N.D. Ill. 1996), aff'd, 185 F.3d 850, (7th Cir. 1999) (observing that, in RICO cases, Federal Rule of Civil Procedure 9(b) requires that "the complaint must, at a minimum, describe [fraudbased] predicate acts with some specificity and 'state the time, place, and content of the alleged communications perpetuating the fraud'"). See Sabrina Roppo v. Travelers Commercial Insurance Co., 2017 WL 3695205 (7th Cir. 2017) (insufficient fraud pleadings); Northeast Revenue Services, LLC v. Maps Indeed, Inc., 685 Fed. Appx. 96 (3d Cir. 2017) (reiterating requirement of particularity in mail fraud pleading); American BioCare Inc. v. Howard & Howard Attorneys Pllc, 2017 WL 3530888 (6th Cir. 2017) (same); Kostovetsky v. Ambit Energy Holdings, LLC, 2017 WL 2573273 (N.D. Ill. 2017) (act of increasing customers' rates did not constitute mail fraud).

3 As to issues relating to mail and wire fraud, see § 6.

4 Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007).

5 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

6 Limestone Dev. Corp. v. Vill. of Lemont, 520 F.3d 797, 803 (7th Cir. 2008) (affirming dismissal of RICO claim and warning against permitting a plaintiff "with a largely groundless claim to simply take up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value, rather than a reasonably founded hope that the [discovery] process will reveal relevant evidence."); LCrest Constr. II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir. 2011) (affirming dismissal of RICO claim where "the complaint has alleged-but it has not 'shown'-'that the pleader is entitled to relief'" (quoting Iqbal, 556 U.S. at 678).

7 See Tafflin v. Levitt, 493 U.S. 455 (1990).

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.