RICO can be dynamite. But in the wrong hands, it can backfire explosively.


A Missouri bank sued one of its customers, the heirs to a famous artist, under civil RICO.

The heirs had accused the Bank of mismanagement of the sizeable estate and made disparaging comments to the media, particularly the Wall Street Journal, which cast the bank in a negative light. The bank then resigned as trustee rather than continue to face more criticism.

But then the Bank sued its former customers under RICO, alleging its reputation was damaged due to the bad publicity and statements made in the state probate case. It claimed it lost income it would otherwise have earned if it continued to manage the estate. The predicate acts were mail and wire fraud, which have to be pled with specificity. This probably sounds like a standard tort case for defamation , and ultimately that is what the district court believed.

The Bank’s RICO case was dead on arrival.

  • First, much of the mail and wire fraud consisted of supposedly false statements made by the heirs about the bank in the probate case. The court rejected these as RICO predicate acts, adhering to the overwhelming weight of authority that rejects efforts by state court losers to relitigate their cases in federal court by accusing their opponents of making false allegations in court. If RICO could be used in this way the federal courts would be full of RICO cases seeking a do over of past litigation. (This may also violate the Rooker Feldman doctrine which holds federal courts do not have jurisdiction to hear appeals of state court judgments. Additionally, many states have laws creating “litigation privileges” for in court statements.) And to the extent the false statements were publicly made, the court believed they more aptly should be brought in state court as defamation or malicious prosecution.
  • Second, the Bank’s theory that it lost income because of the heirs’ statements was inconsistent with its decision to resign as trustee. The heirs did not fire the Bank Thus, the proximate cause of the bank’s lost income was its resignation, not the disparaging statements. RICO requires that the predicate acts be the “proximate cause” of the damages.
  • Finally, there was no pattern of racketeering because all of the predicate acts occurred over a three-month period. Typically there must be well over a year of RICO violations or a clear indication they are ongoing and are a regular way the defendant does business for a pattern to exist. Neither was shown in this case.

The Bank’s RICO case was a loser, and the court was right to dismiss it with prejudice. It belongs in state court, which is where it will now be headed to litigate the state law claims.  And the Bank’s fancy and expensive law firm got it all wrong.

The moral of the story:  RICO should be handled by a lawyer who practices in the field and knows a good case from one which is simply the kind of tort case that federal judges hate to see and waste a tremendous amount of time and money.

If you think you have a RICO case, call Foster PC, the RICO Authority ™ for an honest evaluation.