Federal Deception Law: 8.6.5 Indirect Injury to Third Parties
The plaintiff in a RICO action must have suffered direct injury; indirectly injured third parties do not have RICO standing.
The plaintiff in a RICO action must have suffered direct injury; indirectly injured third parties do not have RICO standing.
The injury must be sufficiently concrete, or ripe, to confer RICO standing.
Prior to filing any RICO claim, be sure to check to see if the relevant court has issued a standing order or a local court rule that requires a plaintiff to file a RICO case statement. The popularity and complexity of RICO claims have led many courts to institute special procedures specific to cases involving RICO counts.
Pleading a RICO claim properly requires reasonably detailed allegations of fraud and a multi-faceted claim for relief. Many local courts have special requirements for pleading RICO cases, and these should be followed carefully.431
Careful drafting, an understanding of the RICO statute and its elements, and knowledge of local requirements will all help protect against a Rule 11 claim.455 So long as a claim has not been established as clearly non-viable, courts in RICO cases have been reluctant to impose Rule 11 sanctions against lawyers using RICO in novel ways.456
Most courts have construed RICO as having a nationwide service of process provision,465 so that suit can be brought in a convenient forum without concern for whether the defendant has minimum contacts with the state.466 However, circuit decisions are split as to whether the nationwide service of process provision itself provides a sufficient basis for personal jurisdiction,467 or whether a plaintiff must first establish personal jurisdiction
The Supreme Court has ruled that the statute of limitations in RICO cases is four years.478 When the statute of limitations begins to run remains a question answered differently in different jurisdictions.
The first issue to determine is whether the claim is yet in existence. The Second Circuit holds that when a separate bankruptcy proceeding is pending in which the plaintiff stands to recover all or some of their damages, a RICO claim has yet to accrue.479
Since civil RICO claims are essentially fraud claims, at least one commentator has suggested they should be proven by clear and convincing evidence, the traditional standard of proof in fraud cases.519 However, federal courts have ruled with near universal agreement that civil RICO claims, even those based on mail and wire fraud, need only be established by a preponderance of the evidence.520 These courts have found support in Sedima, in which the Supreme Court, while refusing to de
Section 1964(d) specifically provides that a conviction in a criminal action brought by the United States estops the defendant from denying the essential allegations of the offense in any subsequent civil action brought by the United States.
The FTC Credit Practices Rule applies to finance companies, retailers, and other creditors within the FTC’s jurisdiction but does not apply to banks, savings and loan associations, or credit unions.
FTC staff letters interpret the Credit Practices Rule very narrowly. For example, while the Credit Practices Rule restricts security interests in “household goods,”90 the FTC staff has tried to limit the number of items treated as “household goods,” excluding such common household items as books, encyclopedias, rugs, luggage, and children’s car seats.
The Credit Practices Rule prohibits contract clauses that waive or limit exemptions from attachment, execution, or other process on the debtor’s real or personal property.117 The prohibition applies not only to property owned by the consumer but also to property held by or “due” to the consumer, thus covering wages or other debts owed to the consumer.118 There is an exception for property subject to a security interest executed in connection with the transaction.
The Credit Practices Rule prohibits non-purchase money and non-possessory security interests in household goods.145 The rule defines household goods as clothing, furniture, appliances, one radio, one television, linens, china, crockery, kitchenware, and personal effects, including wedding rings.146 The FTC staff considers “personal effects” to be limited to items that an individual would ordinarily carry about on their person and possessions of a uniquely personal nature, such as family photogra
The Credit Practices Rule prohibits pyramiding of late charges—that is, assessing more than one delinquency charge for one late payment.199 Pyramiding is accomplished by attributing a borrower’s current payments first to outstanding late charges or overdue amounts and only second to the installment that is currently due.
The rule requires a notice to co-signers, warning them of their potential obligations.206 The notice must be in the form prescribed by the FTC.207 However, references to creditor remedies that are not allowed under the laws of a particular state may be deleted in order to make the notice accurate.208 The creditor may add a summary identifying information such as the date, account number, name, address, and loan amount
Res judicata (claim preclusion)526 and collateral estoppel (issue preclusion)527 may also be used defensively against RICO plaintiffs. Res judicata can preclude litigation of all claims that could have been raised in the earlier proceeding, even if they were not.528 The doctrine of res judicata requires that the parties in the present suit be the same as those in the prior suit.529
RICO is silent as to common law defenses such as in pari delicto (the plaintiff is equally at fault), but some circuit courts have concluded that in pari delicto is a valid defense to a civil RICO claim.533
Although the Supreme Court has not established a measure of damages available in RICO claims,534 it has stated that “the compensable injury necessarily is the harm caused by predicate offenses sufficiently related to constitute a pattern.”535 Accordingly, a court should consider any reasonable basis for assessing the injury.
A successful RICO claimant will be awarded treble damages. The jury will not normally be told about either the triple damages provision or the attorney fee provision.540
The RICO statute provides that an injured person “shall” recover costs, including a reasonable attorney fee.545 The attorney fees awarded need not be in proportion to the amount of damages.546 Singling out RICO defendants for the imposition of attorney fee liability does not deny them equal protection of the laws.547 A prevailing defendant, however, is not entitled to fees.548
The district courts have jurisdiction to prevent and restrain RICO violations by means including, but not limited to, compelling divestiture of interests in an enterprise, placing reasonable restrictions on a person’s future activities or investments, and even ordering the dissolution or reorganization of an enterprise.556 The U.S. Attorney General is expressly authorized to seek such relief,557 but whether private civil litigants may obtain it is a question that has divided the courts.