When does an ordinary tort case become a RICO case? If there were a simple answer to this question, the federal courts would have enunciated a black letter rule many years ago and reduced their workloads significantly. Since there is no such rule, a plaintiff with a potential RICO case needs to consider several factors. The most difficult of these is the requirement of a pattern of racketeering activity. The law was enacted to redress long-term illegal behavior. A person or business that has been harmed by a single episode of fraud, regardless of how much money is involved, needs to show that the defendant is a serial violator. One way of doing this is to conduct a simple litigation search of the defendant and see if it has been sued before for similar misconduct. If so, then there may be a pattern. But the prior illegal conduct needs to be related to the current misconduct and have occurred within the last decade.
The other important element is the use of an “enterprise” in carrying out the racketeering activity. The enterprise must be a separate entity through which the alleged racketeer does its misdeeds, such as crime family or a legitimate corporation. . A person acting alone, as many criminals do, does not violate RICO regardless of how much carnage he leaves in his wake. There has to be an enterprise, and it needs to be used or victimized (infiltrated) for the requisite involvement to be shown.
RICO is both over and under-utilized. Many lawyers file RICO cases not understanding these basic principles. Their cases usually get dismissed right away and we end up with scores of decisions pointing out the same rules about pattern, enterprise and causation( addressed in prior posts). And then there are plaintiffs with legitimate grievances, usually involving fraud or extortion, where RICO could be used effectively if their lawyers thought more strategically, but do not. They have no experience with the RICO, or more commonly, are state court practitioners and are afraid of the federal rules and federal judges. Plaintiffs’ lawyers tend to practice in state courts and one good reason is that according to many studies state judges and juries are more liberal with other people’s money. Yet, today, since only 1% of non-personal injury civil cases go to trial, one wonders if jury considerations should even matter in evaluating a RICO case.
For the same reason, plaintiffs should not salivate at the prospect of triple damages and attorney’s fees, which RICO requires be awarded to a successful plaintiff. (Winning defendants don’t get their attorney’s fees.) Very few civil RICO cases will go to trial no matter how strong they are. The cost of federal litigation, damage experts, and competent counsel are a significant factor in settlement decisions. Triple damages and attorney’s fees are a strong incentive for defendants to settle, and settle earlier rather than right before trial, but nobody should expect to get them at the outset of a case.
The bottom line is that anyone victimized by fraud or other purported RICO violations should evaluate their case with a lawyer who knows RICO.