On demand 1h 8m 49s Basic

Civil RICO Claims

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Civil RICO Claims

In this course, we will analyze the historical context of civil RICO claims and explore how relevant case law affects a RICO case plaintiff, including the particularity required of a claim (time, place, etc), details of the mental state, and pattern of activity.

Transcript

- [Chuck] Hello, my name is Chuck Dalziel. I'm an attorney in Marietta, Georgia. I've been practicing, as the year ends and we go to the next year, I'll be able to say I've been practicing for 43 years. And during my career I've done a fair amount of work on RICO cases, both federal and state. In a couple of my cases where I was representing a person who had lost money, I was actually involved in a couple cases representing them as victims when the fraudsters that had taken their money were actually being tried for RICO because they were like 14 or 15 different victims of the same thing. The one I'm referring to most recently was a situation where a guy was sort of posing himself as a used car dealer or more of as a broker who would go find you whatever you needed at the auction, you know, as far as a car, but he'd take your money and he wouldn't deliver the car. And so, he did that about 15 times in the state court of DeKalb County or the supreme court of DeKalb County. The district attorney is really what I'm trying to say. The district attorney prosecuted him for RICO, and so I was involved in that, So I've got a lot of experience with this, I've made a couple of presentations before about it and so I'm going to try to cover RICO, both on the federal side and the state side. With the state side being primary Georgia, because that's the state that I'm from, but I'll be talking about the absolute plethora of state RICO statutes that don't lay completely on top and in duplication of the federal RICO statutes. There's a lot of differences, and we'll be talking about that a little bit later, but we're gonna start with the most basic thing and go from there. Okay, so RICO is the acronym for the Racketeer Influenced and Corrupt Organizations Act. And the federal RICO statute is that 18 USC 1961 and following. The state RICO statutes, there's a very large number of states that have their own. When I was doing the research, it was showing 31 as of 2016, I think the number now is 33. And then Puerto Rico and the Virgin Islands also have, the United States, Virgin Islands. They also have their own RICO statutes, which are called Little RICOs. The Georgia RICO statute is in OCGA 16-14-1. Now, the idea when they were passing these statues is that if they sort of portrayed activity that had not traditionally been prosecuted sufficiently because it was quote, quote, organized crime, you know, that this statute would give the prosecutors and then the civil plaintiffs more leverage. Because one of the things you're gonna see is that in order to have a RICO case, you gotta have multiple people involved in most cases. And so, what that does is that allows the prosecutors to threaten to charge other people who will then turn evidence on the kingpins as we would call them. And so, that's actually the intention of this statute to a large degree. Okay, so one of the things that you would ask is if we have a federal RICO statute, if you're gonna have a civil case, 'cause that's what really what we're talking about mostly here, if you're gonna have a civil case, does it have to be in federal court? And the answer to that is no. The case was Tafflin versus Levitt, 439 U.S. 455 in 1990. And what the court very much presented as the issue in the case was whether state courts have concurrent jurisdiction over civil actions brought under the Racketeer Influenced and Corrupt Organizations Act. And what the court stated basically as a broad brush, very general overarching principle is that we have a system of dual sovereignty, okay? So, the federal courts have their own sovereignty. The states possess inherent authority to adjudicate claims under the laws of the United States. And so, that is the general rule. And so, in these types of cases, what you have to have determined in some situations is whether there is what we call preemption in the situations where a lawsuit is gonna be filed. And what the effect of this decision is, is to decide that there isn't preemption for federal RICO claims. And the reason that that was decided in Tafflin versus Levitt was that the Congress had not specifically ousted the state courts from jurisdiction over the federal claims. And what the analysis might be today, just as an aside, particularly under Bostock and you know, the Bostock versus Clayton County, the case had held the Title VII covers discrimination based on sexual orientation. Basically the way the court decided that was they just decided, you know what the words meant. And they actually sort of discounted the idea that you should construe a statute by legislative history because legislative history wasn't nearly as reliable. The reporting of that wasn't nearly as reliable as just the actual words of the statute. But back here in 1990 with a court that was composed of largely of different people, they did hold in this case that legislative history was important. And so the issue is, is there permissible federal jurisdiction or is it mandatory? And in these situations, what the end game generally is, and this is another overarching principle that covers almost all areas of the law. If a statute says may is permissive, if it says shall is mandatory. And so in this particular situation, 1964 is the statutory provision authorizing civil RICO claims. And it provides any person injured in this business or property by reason of a violation of 16 1962 of this chapter, may, may, may, may again, may sue therefore in any appropriate U.S. district court and shall recover threefold the damages he sustains on the cost of the suit, including a reasonable attorney's fee. And so, that's the way the court decided the case, was that because it said you can, you may sue in federal court then that the negative pregnant of that is, but you might also sue in state court. And what the court also said that was apparently Congress when they passed this law, we're hearing about this in a, or I should say stimulus legislation that they want to get passed just before the end of the year. And you know, I think I heard it was 4,175 pages long. And so, what you would hear on the radio really from both sides is that it's impossible for the members of Congress to have actually have read the bill. And you know, then in response to that, like Charles Schumer saying, well, what we're doing, is we're having our staff read it and kind of brief us on those 300 pages and then another staffer's briefing us on 300 other pages. But the legislative history on this is a little embarrassing actually because the court in our case specifically, I guess kinda looked for any consideration of the exclusive jurisdiction, the preemption issue when they passed this law. And of course in passing this law is a big thing 'cause it got like treble damages in it and stuff like that. But apparently they didn't considered it all. There's nothing in the record that says, we think that we ought let this be pursued in state court too or nothing saying, Oh, no. This should be only in federal courts. And what they were looking for actually was unmistakable evidence of the intent for exclusive jurisdiction to be in the statute. And it wasn't there. And so, then the party in this case that was arguing that federal jurisdiction should be exclusive was saying, Well, no, no, no, no, no, we gotta have a uniform interpretation of this in all 50 states. But of course, well, that one only apply in criminal cases, not in civil cases. And so, you can have a federal RICO smorgasbord of law because actually what's happened, and I'm gonna tell you why in a minute, is that a lot more of these federal RICO cases have actually been filed in state court under the state court's concurrent jurisdiction. Now, here's why people want to go to state court instead of federal court, particularly in Georgia. Federal Rules of Civil Procedure 8 and also Georgia Civil Practice Act 9-11-8 says that the complaint must contain a, or indeed be is what I'm trying to say, a short and plain statement of the claim, okay? 'Cause what do we have in the United States? We have no displeading, okay? That's really important because in a RICO case, inherently you have to include a whole lot more information. I'm gonna tell you about what that information is as we get through here. But from a pleading standpoint for a RICO civil case, we're now at Atlanta Motor Speedway and the issue is whether the car is gonna start when the race starts 'cause the complaint has to meet certain criteria or the lawsuit really never gets off the ground. And so, the evil that the plaintiff's lawyer in this situation faces, or I guess what I would call the trap is that defendants will move to dismiss the case because there's a quote, quote, shotgun complaint. This is a label that the originator to this label is a judge from Jacksonville named Gerard Tjoflat. There were a ton of elements in these RICO situations if you're gonna actually state a claim, and so the shotgun complaint argument for dismissal is like custom made for a RICO complaint, okay? So, let's go through a couple of examples of what I mean. Okay, so Vibe Micro, Inc versus Shabanets is a 2018 case that involved a RICO case, all right? And so what the deal is, is if you file a lawsuit in federal court, they're supposed to answer within 14 days, and a lot of times they don't answer and it set that file in motion to dismiss for failure to state a claim. And in the federal courts when you do that, that doesn't automatically stay discovery. But most of the time when they file these, of course they'll also file accompanying motion to stay discovery. So in this case, the first amended complaint was 56 pages long, had 168 pages of exhibits. And then the plaintiff was in the crosshairs of the shotgun complaint argument, and so they amended it to where that was 70 pages and 160 pages of exhibits. So, the judge enters an order and basically gives the plaintiff or lawyer a roadmap as to how to make the complaint sufficient. And when the plaintiff's lawyer didn't do so, the case was dismissed with prejudice. And for personal experience, I can tell you that the district judge was doing the plaintiff's lawyer a big favor because if he was saying in effect, I'll consider it adequate if you follow my map, that was kind of insane judgment for the plaintiff's lawyer not to do exactly what the judge said. But because he didn't, the case was dismissed with prejudice. And generally what you can find is that the judges in a certain number of cases will go ahead and dismiss a shotgun complaint. Senate doesn't state a claim upon which relief could be granted like grant of. But the law is basically that the plaintiff should get at least one shot at amending the complaint. But there's actually a hidden risk there that I've discussed in other presentations. And what it is, is if you go in and the first decision is, is that your complaint doesn't state a claim and then you you try maybe a second time or even a third time to amend the complaint to make it state a claim. At a certain point, the other side if you're failing is gonna say you're violated Rule 11 by even filing the RICO complaint in the first place. And so, if that amendment process is actually kind of fraught with a little bit of danger, which might be the reason that the plaintiff's lawyer said, Well, I'll just appeal, I won't follow the roadmap. Okay. Let's talk about the federal pleading rules 'cause this is very important. In Bell Atlantic versus Twombly, and Ashcroft versus Iqbal, the Supreme Court ruled that, well, what they did first was there was this case that it was the Kindly case. And it basically what the Kindly case said is that unless the moving party could show that there was no way that the plaintiff could win, that there was no possible set of facts that could be proven under the allegations of the complaint that would be a winning case. That that would be the only time that you would have your complaint dismissed under 12 . But in Bell Atlantic versus Twombly, what the deal was, this is a sort of a post AT&T split up case, it's 2007, so AT&T's been split up for a long time. But all of the different Bell entities and other entities were providing I think both cell phone service and internet service at that time, so they wanted to have a class action that included everybody that was a customer of those entities. And I've written other places that that was probably like 80% of the population of the United States. And so that was a pretty daunting claim for a court of any kind and particularly the Supreme Court to rule could go forward 'cause that and you talk about some consumption of judicial resources like Judge Joe Flat is or Tjoflat is concerned about that case, that bid with class action would've been such a thing. And so, they had to come up with someone to dismiss it and Justice Souter wrote this opinion, it was a 7/2 opinion and Justice Souter wrote it and he came up with the idea that the complaint has to be plausible. That you have to state a plausible claim in order to survive 12 . And there are no objective factors. You know, there's not like 11 factors that the court laid out and say, well, this is how you know it's plausible. This is kinda like pornography. You kinda know it when you see it. And the judge either knows it's plausible or the judge knows it's not plausible. And two years later in a different case that only involved one person instead of a set of plaintiffs that included 80% of the country, Justice Souter actually flipped and wrote the dissenting opinion in Iqbal, and Iqbal was only a 5/4 case, okay? And I mean, this is a way to say that he's trying to smother the baby he birthed. He birthed plausibility and then he realizes that he put a gun in the hand of any judge that wanted to shoot down any case 'cause any judge wanting to shoot down any case and not bother with it could just say it's implausible. And so Souter was going like, No, no, no, no, this is really an opinion, it's very the opinion, this is really in the opinion. Then what is implausible, excuse me, not unplausible. Implausible the way he intended it was if you're making allegations about little green men, that's actually what he says in the opinion, okay? And four of the Supreme Court agreed with that, but five didn't. And what the opinions are saying, well, is that this is very historic law in this area. The court has to take the allegations that's true, even if doubtful, even if the actual proof of pleaded facts is improbable. 12 does not count in its dismissals based on each judge's disbelief of the complaint's factual allegations. Well, I'm gonna tell you in a minute how the judge gets around that. Real world wise, these statements are laughable. The judge doesn't need to say she considers the allegation's false. All she has to do is to dismiss the case, is just to label the claims implausible. And like I said, it's like pornography, it's just like you just know it when you see it. Okay. So here's why, in my opinion, Iqbal and Twombly put up this standard of plausibility. What about was when the Federal Rules of Civil Procedure were first enacted in 1937. It was fairly outrageous to accuse someone of fraud in a civil case. And 85 years later, with the deluge of attorneys that we have now and common securities fraud cases and fraud cases like consumer fraud, statutes, I mean you can just go on and on and on. Fraud is a claim just like any other claim. It doesn't have any distinction whatsoever, yet federal rule 9 , there should be a 9 there not just a b. Federal 9 is a huge open door for motion to dismiss practice even today and it's growing, it's not shrinking, it's growing 'cause these lawyers on the defense side, they know they can make a lot of money making motions to dismiss and they can potentially bar discovery forever, so that the truth about the case will never come out. The original public policy behind 9 , in 1937, again, remember that's 85 years ago, it was that it was unfair for the plaintiff to accuse the defendant of fraud and that allowing fraud allegations created a danger of upsetting transactions that were already closed out. What we're talking about here, even today, like in the Georgia, there's a concept called merger by deed. And what that means is like when you sell your house to somebody and they buy it, everybody wants finality 'cause the money's, you know, it's really probably not all your money. A lot of the money is going to the lenders in the house closing. And then new money is being originated in the house closing as well. So, you don't wanna have transactions like that upset. And so basically merger my deed, what it does is if you made tons of representations about whether the basement leaked or something else, come up with some other adverse facts and then the buyer claims that they didn't know about all that and they wouldn't have bought the house, but for the fact that you concealed that. Merger by deed extinguishes everything that was said in front of the deed or before the deed was recorded, and that is not in the deed. And so, like if you're a buyer, what you would want to do is any representations that you wanna rely upon, they're actually in the papers, okay? But if they're not in the papers, then what the plaintiff is gonna wanna do is throw a Hail Mary pass of a fraud allegation. And this body of common law eliminates a lot of those claims when they're presented, but what it really does is eliminate a lot more of potential claims that are never asserted because the law is the law. Okay. The law favored fraud, disfavored, excuse me, fraud claims historically. They had the idea that sort of the same idea, if you think about it's the idea in the Bar rules, where it says that you can't threaten criminal consequences to a gain advantage in a civil matter. So, throwing out these fraud charges was also seen as sort of taking an unfair advantage because you're accusing the defendant of doing something that's morally wrong. And the particular desire in this context was to protect professionals that saved their reputation from improvident charges, particularly like the professional would be the one that would be doing the loan closing, so they could be sodic to that. And then one of the other concerns was that they didn't want to allow to use the fraud allegations to open the key to discovery, so only the better pled fraud claims, the more detailed ones get discovery. But if you give them too much detail, then you hit the shotgun complaint defense, and so you're kind of in a catch-22. And 9 is also argued that the defendant needs adequate notice of the fraud charges. What we're gonna hear about later is that a lot of times the defendant actually answers the complaint while at the same time make it a contemporaneous 12 motion. And yet in the 12 notion, even though they've already answered the case, they claimed that they didn't have adequate notice of what was alleged, which is kind of counterintuitive to the idea that they went ahead and answered it, okay? All right, so federal RICO plaintiffs must grasps the hostility embodied in the 9 decisions because the language of 9 is not nearly as, or it's not setting a bar nearly as high as what the case is established. In alleging fraud or mistake, 9 says a party must state with particularity in the circumstances constituting fraud or mistake, all right? So, that you gotta have some detail, but you don't have to say why you know that they had malice or intent or comparable knowledge that could just be alleged generally, okay? That would be the law generally you would think under 9 , but no, sir, under Iqbal, you have to convince the judge with the complaint that there's more than a possibility of misconduct and what the court doesn't believe yet in the course of dismissing the complaint will just label what you said as a legal conclusion. And so going now back to Twombly, what we got here is an antitrust case, okay? So, you got two big issues in the antitrust case. One is, are the defendants acting the same, okay? And if they're aiming the same and there are these big entities, there might be an antitrust case there, but what is required for there to be an antitrust case there is that they're agreeing to act in concert. It's not enough for your gas station, like over here when the gas was like 3,15 a gallon, somehow a racetrack on one of the roads that I travel on there, gas price was 2,55. And that was because of Chevron next door had opened and they went with a loss leader price of 2,55. And you would think, they're doing the same thing, but they're in competition, they're really not agreeing to do it, and so what they were looking for in Twombly was an allegation that the Bell entities and Verizon, and Xfinity and all these other people, they'd actually agreed to act the same. And so, what Twombly was looking for was that the defendants had entered into a contract combination or conspiracy to prevent competitive entry into the market. That can be proven right then, or that could be alleged in sufficient detail, in plausible detail by right then. And so, from my perspective, you know what the answer to that is? Well, of course the existence of any of the three of the contract combination or the conspiracy was a legal conclusion because presuit the defendants certainly had not given the plaintiffs evidence of their written contracts, they hadn't given 'em copies of them, they hadn't given them the substance of their oral contracts, they hadn't given them evidence of their combination or conspiracy. So, the idea that at this point that the Twombly plaintiff should have been able to prove that is ludicrous. And the whole issue, or the whole strategy is what I'm trying to say of the Twombly decision or the Twombly defendant's decision to move to dismiss was so that they could prevent this evidence from coming out if there was any there, okay? Because what happened was when the suit got dismissed, we don't have any knowledge one way or the other whether the defendants actually had written contracts, they showed that they were gonna act in concert or that they were oral contracts that did that, or that they may sign a combination or conspiracy because the court's decision that wasn't plausible. What it means is, is that they don't get discovery. That's the issue. Do they allege enough to get discovery? Okay, so what I'm saying about that is that you gotta have the nudge from your complaint to get to discovery, okay? The nudge comes from the presence of factual allegations that are not conclusory, okay? So Judge Kennedy wanted to make sure that he, Justice Kennedy wanted to make sure that he makes this real clear to everybody, says that the allegations that the Iqbal plaintiff made were too chimerical, I think is how you pronounce that, I don't even know. But chimerical generally refers to mythical animals, okay? But there is a second or third line definition that says illusory or impossible to prove, okay? So this, the idea that the illusionary or impossible to prove can only come from the mind of the judge because without discovery, I mean obviously the plaintiff is in the position at that point where it's impossible to prove the conspiracy with what they have. And so, the court has unstrained power then to disbelieve the allegations of the complaint by labeling them implausible. And so, in federal court that's going to limit very much I would say both even the desire of plaintiff's lawyers to file case, RICO cases in federal court, but also it's a huge threat to the survival of RICO claims past motion to dismiss. Now, who were the defendants in Iqbal and what was it about, okay? The two defendants were at General Attorney John Ashcroft, Attorney General John Ashcroft and director of the FBI, Robert Mueller. And what they were being sued about by Iqbal was that they had violated constitutional rights. He was actually out of prison, Iqbal was, at the time that he sued. But he was basically saying, when I was in prison I was sodic to discrimination primarily based on my national origin. And that Attorney General Ashcroft and director of the FBI, Robert Mueller were behind the plans that violated these constitutional rights that I had. And the funny part about this case I didn't notice till I did this research for this presentation was that Ashcroft, he had been the senator from Missouri and in 2000 I believe it was, he actually was running against this guy Mel Carnahan. And Mel Carnahan was killed in a plane crash. And so, Ashcroft has the distinction of being the only U.S. senator ever defeated for reelection by a dead opponent. And the Democratic governor of Missouri put it out that he was gonna nominate 'cause that's the way it worked, after the election was won by a dead person. The Democratic governor of Missouri actually put it out that he was gonna nominate Mrs. Carnahan, and so George W. Bush just got Ashcroft to become attorney general and guess who swore him in? Clarence Thomas. But Clarence Thomas didn't recluse himself from deciding this case, okay? So he was actually a lobbyist actually when Ashcroft was, when this was decided. And he and Mueller, they had as attorneys not the best performance in his case and their outside attorneys certainly didn't have the best performance in this case because they conceded that they could be personally liable under Bivens as a supervisor and they could be personally liable as a supervisor for the actions of other people who were beneath them on the grounds of respondeat superior. And particularly Souter in his dissent in this case makes a big deal out of that, that the court really didn't consider the theory that they sort of admitted to of respondeat superior or for the actions of other people. They only considered whether they could be personally liable. And so, what ended up happening was that the Iqbal complaint was deemed deficient and implausible, and so had to be dismissed. And so, Iqbal had only accused Ashcroft and Mueller of adopting a policy of approving restrictive conditions of confinement for September 11 detainees. And the idea is not that they did it because they were September 11 detainees, but because of their race, religion, or national origin. And Justice Kennedy was the one that wrote this opinion and he basically said, we gotta have an allegation of that kind of discrimination. And since it's not alleged, nor is it alleged that Ashcroft and Mueller had a discriminatory state of mind in the implementation of the policies that they imposed against people like Iqbal because that wasn't there then the claim was implausible. And the dissenters, there were four of them, Justice Souter, Justice Ginsberg, Justice Stevens, and Justice Breyer. And by this time Justice Stevens is gone completely over the wall and is a liberal. And so proving, this is what I say, proving the call on plausibility is a label, the majority in spite of the concession that they made about the fact that they could be liable for respondeat superior. The majority labeled the allegation that defendants authorized, condoned or were even aware of the discrimination their subordinates were committing was conclusory. And the dissenters are saying, Well, no, no, no, wait. They agreed they could be liable for this. And so, what does all this mean, Twombly and Iqbal, for a RICO plaintiff? Well, what it means is that you have to plead essentials of the RICO claim in as much detail as possible while keeping the complaint relatively short, and there's several different ways you could do that. One of 'em that is really bizarre into 43 years that I've been practicing, I was taught for about 36 or seven of those years before I started reading these cases that the traditional way to do it was to plead the facts and then you'd have count one and then the first paragraph of count one would be we incorporate the factual allegations of paragraphs X through Y by a reference, and so then that would be repeated through all the counts. And that's a huge bopa If you're trying to not have a shotgun complaint in the 11th Circuit. That's totally verboten that you should ever incorporate by reference any allegations. There's really no point in you attaching any papers to your RICO complaint unless they happen to be the actual agreements that show that there was a conspiracy or action that was done in accordance with the racketeering plan. Because in many of those instances, if you attach is not what the judge deems sufficient, the actual attachment of it as opposed to just leaving it vague will actually work against a pleader. You have to plead racketeering activity under 18 USC 1961 . That's the definition of racketeering activity. And it's extremely long, it includes many, many serious crimes. But the crimes that are generally being alleged in these RICO civil cases are like mail fraud and wire fraud. That's generally what they wanna go with. Used to be that they could also allege securities fraud, but an amendment's been made to the statute that doesn't allow that anymore, okay? So, you want to try to plead these crimes specifically as to time, place, participants, content of fraudulent communications, other details of other crimes, parties to the crimes and the victims, okay? And you can plead the required mental state showing willful acts or culpable knowledge of the acts, but probably actually the more detail that you could include on that, that might actually help you to avoid a conclusory determination. Okay. But you have to do it in a way where the details don't reach the shotgun level, okay? So you have to plead the injury and then link the injury to the cause, that is the racketeering activity, okay? In federal court you have to plead a pattern of racketeering activity and it has to include at least two acts of racketeering activity, and the last of which occurred in the last 10 years. And so, what you're looking at there is the possibility that it occurred 10 years ago, but the criminal justice system didn't get it to a point where us could conclusively established to be a crime by conviction or guilty plea until a lot lighter than the last 10 years, like eight years after the actual act, okay? So, that's when they have that long window there. You have to plea that the predicate acts are continuous, potentially. It makes it a more attractive claim to wanna stop the activity from occurring if you got continuous acts as opposed to acts that have been already stopped. So down there below, as you see, what you want do if you can, is to plead a threat of more predicate acts. The predicate act acts have to show a pattern under federal RICO by having the same or related participants results, victims, ways of calming the resulting damage to the victim. And that's that, okay? And then we also have to plead that the, what we're changing in these RICO cases is money or property, okay? And so, we plead that the racking activity income was invested in the enterprise. That's a big issue under the federal RICO statute. And the enterprise has to be involved in interstate commerce to establish federal jurisdiction, okay? The enterprise is an individual and a partnership or corporation, an association or other legal entity or group associated in fact though not a legal entity, okay? All right. So, you can plead that a person which includes all of those things conducts or participates indirectly or directly in the conduct of the enterprise through a pattern of racketeering. And you can also plea conspiracy to engage in racketeering activity. Okay. So, what is an enterprise? An enterprise, there are three elements for it under Boyle versus U.S., which is in decided in 2009, okay? It has to have a purpose, the enterprise has to have a purpose, and it's a criminal purpose. The enterprise has to have relationships among those associated with the enterprise and it has to have longevity sufficient to prevent those associated to pursue the enterprise's purpose, okay? So, you got people who are associated, longevity permitting those associated to pursue the purpose and the purpose. Okay. You're after the persons or people who are investing or participating in the enterprise, not the enterprise itself. Okay. So you have to have, for a case that's gonna survive 12 , you gotta have an allegation of a person and an enterprise, and there must be distinctness between the RICO enterprise and the person, personal defendant required. And if you think about it, in the United States, the whole reason that you create a legal entity is somewhat to be separate from your person. So if that's the case, then somebody can get it themselves in a RICO trouble by actually doing things in connection with their own entity. And the entity is still a separate entity from the person, even if the person is the only shareholder. And so, if the sole owner uses the enterprise to commit unlawful activity, RICO can reach that person. And so, Don King, the guy with the crazy hair that had association with Mike Tyson, he actually lost this issue about whether he personally running his solely own enterprises, he could properly be a RICO defendant. And he properly could be a RICO defendant because he was separate from his entities, okay? So there are many, many issues under federal RICO that the Supreme Court has not decided, so I'm gonna go through some of the cases under the 11th Circuit, okay? So we have this case, Ominipol versus Multinational Services, I think it's So, they saying there that you gotta plead the racketeering conduct, you gotta plead the enterprise, you gotta plead the pattern, you gotta plead that the conduct equals racketeering activity. And so, if you're trying to get an enterprise determination, that can include a group of persons associated in fact, although not a legal entity. And so, that's actually statutory language is sort of like the omnibus language in the statute. And so, that's turned into a term of art. And the term of art is associated in fact enterprise, okay? And so, you have to plead relationships in the activities relevant to the racketeering claim, not just the fact that the people knew each other or the details of the alleged agreement. You have to actually plea facts that put the people in the middle of the agreement and in activities that were undertaken in furtherance of the agreement. Okay? So this one, this is called Ray versus Spirit Airlines. And what this is about, this is a class action where Spirit Airlines would put a $9,99 cent fee on your ticket, but that wasn't disclosed when you were buying a ticket online or on the phone. And so in this situation, what the plaintiffs did, which was a horrible mistake, was they filed a one defendant RICO case in a situation where there were gazillions of stockholders of Spirit Airlines. And so, what was ruled was that even though there were a lot of people involved in Spirit Airlines like officers, directors, employees, et cetera, et cetera, et cetera. These people could be acting not for RICO purposes, but just in the regular course of business. And so if you said, okay, yes, Spirit Airlines was acting through its officers and directors and employees. That really didn't prove anything for a RICO case. There has to be a sinister purpose apart for the normal work that the participants had actual knowledge of and actual participation in for you to get to the level of a RICO case. And again, what we're needing to catch from this is that if you just allege that the corporation, the big mama corporation did sinister things through its employees adding within the scope of their employment, that doesn't create the distinctiveness that's needed to get you a RICO case. RICO injury is required to be pled under Spirit, and pleading that the proximate cause of the RICO injury was the RICO violation, okay? RICO was, or Spirit was the RICO class action. The underlying crimes were mail and wire fraud, okay? Each of the seven rep plaintiffs, what they should have done was they should have pled that I wouldn't have bought the ticket had I known that I was gonna be charged the $9,99 cents fee, but that was left out of the complaint and that was fatal. Because it wasn't pled that they had a direct injury from what they were complaining about. In short, the court said, and this is a perfect example of the court making one, two, three, four, five, six inferences and then declaring based on the inferences that they made that what is being alleged is implausible. So they said, In short, it seems utterly implausible to us that Spirit's customers would've declined to purchase a ticket if, in the taxes and fees listing on the website, they encountered an item titled Airline-Imposed Passenger Usage Fee. In other words that if it had been disclosed, it would've been immaterial. And the plaintiffs have pled nothing even remotely suggesting that they or anyone else for that matter would have acted at all differently had Spirit been clearer in its presentation and description of the passenger usage fee, so the absence of those allegations allowed the court to say that, okay? So, that was some big mistake that the pleader made in Spirit. Okay. So, if you could plead a RICO claim past the motion to dismiss and actually prove the case, and just as a aside, if you get it past the motion to dismiss, there's gonna be very, very few cases that are actually tried on RICO. Most of 'em will be settled. But the civil actions are permitted. You can actually ask for injunctive relief in the civil RICO case, kind of like you can under Title VII for example. And also under consumer protection statutes you can ask for injunctive relief and under the statutes that apply to unfair and deceptive practices in the commercial realm, there's also injunctive relief there. If you're asking for the injunctive relief, it's very severe. You have the availability to get an order divesting the defendants of their interest in the enterprise prohibiting them for participating in the enterprise, prohibiting further investment and even dissolving the enterprise, and I guess all the other people who were involved in the enterprise in sort of maybe a disgorgement type statute, or not statute, but status. And if the plaintiff is injured in his business or property by reason of the violation, he may sue for and recover threefold the damages he sustains and the cost of suit, including a reasonable attorney's fees. And so, that's why people want to turn ordinary civil cases in RICO cases because they're going for triple damages and reasonable attorney's fees. Reasonable attorney's fees in some situations, and a recent case involving Ford for example, where they got a judgment, I think it was a 1.7 billion. They had a 40% contingency and the argument was basically that they wouldn't have gotten no $1.7 billion judgment and if it hadn't been for us, so we're entitled to our whole 40% contingent fee as the reasonable fee. And so, the fees that they're seeking are $680 million. And so, that is the kind of thing they could give a plaintiff's lawyer and they send us to try to turn this case into a RICO case, all right? The only time you can do RICO case in the securities realm now under the statutes that they've enacted to try to deter what they call strike suits against firms for securities violations unless they're criminally convicted or they plead guilty, that can't be liable under RICO in a civil case. That creates the issue about, and you gotta go back now and think about the fact that you can file a RICO case within 10 years after the activity that occurred. Okay. So, that creates an issue about one. Maybe you don't wanna file your RICO case until criminal sanctions have been imposed. And why would that be? Well, that would be because you could have a doctrine called estoppel by judgment, or this is a concept kinda like res judicata, where if they've been criminally convicted, and again remember that the criminal conviction would be, you know, under the reasonable doubt standard, not the preponderance of the evidence standard. If you had a situation like that and you could get a conviction within the 10 year window or you could benefit from the conviction that you could anticipate would occur within the 10 year window, then you really wouldn't wanna file your RICO case civilly until the criminal case was decided. Because then that ends up stopping denial of the criminal allegations in the civil case. It makes your case a lot easier to prove, but you would still have to prove that the proximate cause of the injury was the RICO activity, even if there was a criminal conviction. Okay. So, that creates a standing issue, okay? And so, do you have standing to bring the RICO case, okay? And you have to prove more than but for causation of your loss. First you have of course to prove your loss or your direct injury, but you gotta prove better than, but for causation, you have to prove that the racketeering activity was the proximate cause of the loss, okay? Now, this Sedima case holds that, but it also holds that you don't have to have a criminal conclusion before you file your civil RICO case, okay? But then you start asking yourself, well, how can we prove satisfactory that the racketeering activity was the possibly cause of the loss? And sort of like plausibility to a certain extent, that's a judgment call by the court. The court could actually decide in some cases that whatever your loss was, it wasn't proximately caused by the racketeering activity. And so, then you would think that you couldn't suffer because of this proximate cause requirement. You couldn't suffer actionable RICO injury if you hadn't done, I hadn't had an actual reliance on the RICO activity. But in Bridge versus Phoenix Bond & Indemnity Company, in 2008 the Supreme Court actually ruled that you can suffer you by reason of racketeering activity even if you didn't particularly rely on or even maybe know about it as long as it occurred in a market that you were participant in. So in that situation, it is more like a fraud on the market type situation, so that anybody that's in the market can show the necessary proximate cause. So, what kind of injuries can we receive in a RICO case? We can receive damages to business and property. These can include lost profits, interests in customer relationships, a wide range of interests. Like one of the situations you would have in a case between two competitors is that one of the competitors would say for example, that a departing employee that went to the new competitor violated the Computer Protection Systems Act and various things like that and stealing the intellectual property or the trade secrets of the employer. Those were the crimes, and also the mail fraud and wire fraud were tied up in that. And then what they can do is they can actually have expert witnesses to create numbers for lost profits. They can create numbers for lost customer relationships. You can think of all kinds of prime producers. You might be actually fraudulently induced in a RICO situation to actually deliver property to people that have gotten you to do it by RICO activity. What you can't get in a RICO case is recovery for personal injuries. And as I said, there is a issue about when the proximate cause call will be made, and that's a big issue. And in part that's a big issue because you're potentially looking at having your case as the plaintiff thrown out on summary judgment or as the defendant trumping the case on summary judgment. And to a large extent that's a policy decision that the judge makes. And the fact that the issue like that is not going to the jury can very severely affect the settlement value of the RICO case, so that's a very big issue. Now, we'll talk about Georgia very quickly. And almost all of these state RICO statutes differ in material ways from the federal RICO statute. The two main differences in Georgia are that the bar as far as being able to go after a set of defendants as a RICO enterprise is much less in Georgia in part, I just kind of stepped over what I was supposed to say, in part because you're not suing a Georgia RICO enterprise, that's not a requirement, instead you're suing people. Two or more defendants for RICO activities, activities requiring two or more crimes, so as long as you have two or more persons as defined to include entities and two or more crimes, then you have a Georgia RICO case that can potentially survive a motion for summary judgment. And one of the reasons that you would file a case for RICO, both Georgia RICO and federal RICO in a state court in Georgia is that Georgia still follows the Conley case, that the Twombly case and the Iqbal case for federal court purposes, it ditched that. Georgia still follows that. And Georgia, it's leading requirements are basically that you have to give the notice with the short and plain statement of the claim. And then the presumption is if you do that, then immediately you're going to discovery because the court can only throw the case out if it can conclude that it's impossible for the plaintiff to prove a winning case based on the allegations that will remain in the complaint. And so, the anticipation that lawyers would have mostly in the Georgia federal court versus state court determination would be that it would be easier to survive a motion to dismiss in state court as opposed to federal court. There's a lot of material that's available on the internet about RICO that you can access, and you could do some further study in the time that I don't have here in this one hour presentation. But one of the things that I looked at is actually a practice guide concerning civil and RICO litigation in federal courts that was prepared by the Chicago law firm of Jenner & Block. And they cover in gory detail all of the elements common to all civil RICO actions, how to allege and prove the pattern of racketeering, how to allege and prove the RICO enterprise. They go very thoroughly through the standing issues and particularly the reliance issues that I mentioned before. One of the crucial issues that, you know, because this is a situation where we're following the money. And so, you have to have both pleading and evidence of how the racketeering income was invested. Not as much about how it was made, but how it was invested and how the defendants acquired acquisition of control of the enterprise. That's a requirement. And then you can also plead the RICO conspiracy elements. And again, you have the damages, triple damages, you have the attorney's fees. I don't believe, let me look here real quick to as I finish. Yeah, that you would think in this situation that you're getting punitive damages since this is intentional conduct that you're proving. Or in certain situations, like I said, if you're bringing in action after the criminal side of the thing has already been concluded, then you got proof beyond reasonable doubt of intentional conduct. But courts have been nearly unanimous in honoring that punitive damages are not available under RICO. They've reasoned that the seminal civil remedies, including the treble damages, those are punitive in character themselves, and so it would be like double recovery to allow punitive damages in a RICO case. So, that's all the time I have. I am available to you at Chuck Dalziel Law Firm if you have any questions about this. And I would again, encourage you to look at the internet about civil RICO if you have any further questions 'cause there's some very, very detailed presentations about this topic on the internet. Why? Because for these big law firms, it's tremendously lucrative for them to defend a case like this, so they're actually trying to make themselves a very credible source regarding all of the issues of RICO. And so, we covered what we could today, and thank you for your time.

Presenter(s)

CDJ
Charles Dalziel, JD
Principal
Dalziel Law Firm

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