Breaking and associated brands will be offline for scheduled maintenance Friday Feb. 26 9 PM US EST to Saturday Feb. 27 6 AM EST. We apologize for the inconvenience.


Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Many believe that the 1970 civil racketeering law was created to apply only to traditional Mafia-style criminals as a way to force them to pay for their criminal enterprise. Over the years, interpretation of civil RICO (Racketeer Influenced and Corrupt Organizations Act) has evolved into a tug of war between the U.S. Supreme Court, which reads the law broadly to reach beyond the mob, and appellate courts, which have repeatedly curtailed plaintiffs’ use of the act. The notion that the law should only allow recovery for harm caused by organized crime members is a myth, said G. Robert Blakey, drafter of the original statute and a law professor at Notre Dame University. “The mob was the occasion for RICO but it does not define its scope,” he said. “When it was argued on the House and Senate floors, the principal spokesman said, ‘No, it is not a mafia statute,’” Blakey said. The welter of legal standards imposed by courts over the years has created a patchwork of splits in the circuits around the country. Despite this, the Supreme Court has been “vacillating in the degree to which it is willing to intervene to clarify,” Blakey said. But the new term may change that. The justices have granted review in two RICO cases, and the U.S. solicitor general is pushing for review of a third, while a fourth appeal is on the way. In general, the cases raise important questions for the high court of how broadly civil RICO can be applied and what the scope of remedies is, according to Erwin Chemerinsky, a Duke University law professor who will argue on behalf of plaintiffs in one of the cases granted review. Civil v. criminal Civil racketeering is intimately intertwined with its criminal counterpart. Criminal RICO law targets organizations that conspire to commit a pattern of crimes specified in the act, from murder and arson to mail fraud. Civil RICO allows victims of criminal racketeering to be compensated for their losses, although a criminal conviction is not necessary to make the civil claim. Because RICO was modeled on antitrust law, successful private plaintiffs in RICO suits may recover treble damages. Civil RICO has become popular with civil attorneys because it also provides a longer statute of limitations, four years, and allows discovery going back as much as 10 years. Blakey said that while district courts seem to find any excuse to throw out civil RICO cases, they do not do the same to criminal racketeering cases. The criminal sanctions have been used more often against political corruption than the mob, he said. “Politicians have felt the full brunt of RICO and that doesn’t bother me at all. We can live with a few Mafiosi, but a crooked politician affects everything,” he said. For the 2005 term, the high court has agreed to review the appropriateness of a national injunction prohibiting anti-abortion pickets from blockading abortion clinics, Scheidler v. National Organization for Women, No. 04-1244, and the Bank of China’s effort to reinstate a $132 million RICO jury verdict against defendants accused of conspiring to cheat the bank through fraudulent loan deals, Bank of China, NY Branch v. NMB, No. 03-1559. In addition, the solicitor general has asked the court to review a recent 2-1 decision by the U.S. Circuit Court for the District of Columbia, which eliminated the government’s RICO remedy: forcing the tobacco industry to disgorge $280 billion it earned through alleged fraud by lying to the American people about the dangers of smoking. [NLJ, 8-8-05]. That decision, in U.S. v. Philip Morris USA Inc., 396 F.3d 1190 (2005), conflicts with decisions in the 2d and 5th circuits, Blakey said. Both those decisions, U.S. v. Carson, 52 F.3d 1173 (2d Cir. 1995) and Richard v. Hoechst Celanese Chem. Group Inc., 355 F.3d 345 (5th Cir. 2003), authorize equitable disgorgement as a RICO remedy, wrote Edwin Kneedler, acting solicitor general. Perhaps the most unusual of the four cases is one expected to reach the high court by November. It springs from a split between the 9th Circuit and the 7th and 11th circuits. The 9th Circuit held in August that a convicted murderer can sue the Los Angeles Police Department as a racketeering enterprise, alleging that he was framed and falsely imprisoned by officers in what became known as the Ramparts scandal, Diaz v. Gates, No. 02-56818. Ramparts refers to the police division where officers were accused of stealing drugs and framing hundreds of suspects on phony charges in 2000. Traditionally, the injury to property may come in the form of a burned-out building, but in the case of David Diaz, his alleged injury-false imprisonment by police-hindered his ability to earn a living. The 9th Circuit said a loss or injury in employment can be considered an injury to property for purposes of civil RICO. That runs counter to an 11th Circuit decision denying damages sought by the relatives of FBI agents killed in a shootout with criminal suspects, Grogan v. Platt, 835 F.2d 844 (1988), and a 7th Circuit decision in Doe v. Roe, 958 F.2d 763 (1992), which held that economic losses flowing from personal injuries cannot be recovered using RICO. While Diaz may have standing to get in the courthouse door, that does not mean his RICO will survive, the appeals court made clear. Whether his racketeering allegations are adequate “is a matter on which we express no view,” the 7-4 unsigned opinion stated. To Stephen Yagman, Los Angeles attorney for Diaz, the Supreme Court declared 20 years ago that civil RICO is “wide as the earth and high as the sky,” starting with Sedima v. Imrex Co., 473 U.S. 479 (1985). Judge Stephen Reinhardt, in a concurring opinion in Diaz, suggested that it is time for Congress to reconsider the breadth of the law. Starting with Sedima, racketeering law has been “stretched both in scope and meaning far beyond that which Congress originally intended,” he said. “In my view, it is well past the time for our lawmakers to take another look at RICO and consider amending the statute so as to limit it to its original purpose.” Dissenting Judge Ronald M. Gould warned that the Diaz majority would confer standing to sue on any plaintiff RICO-savvy enough to allege lost employment. Whatever happens to Diaz, Yagman points out that there are 150 to 200 civil suits by prisoners stemming from the Ramparts police scandal, many with RICO claims. Those defendants may now keep those suits alive. Los Angeles Deputy City Attorney Janet G. Bogigian said the city will appeal the 9th Circuit decision by November. Although she declined to discuss the case, her papers filed with the appeals court state that Diaz tried to “fashion an obstruction of justice allegation from his evidence of fabrication and witness tampering.” It does not save his RICO case, she argued. Chemerinsky speculated that it is possible the high court would accept the Diaz case. Notre Dame’s Blakey was more doubtful. He called the Diaz case “factually unattractive.” Nonetheless, he said, “I think the 9th Circuit is right and the 7th Circuit is wrong.” Chemerinsky said, “The brilliance of Diaz is that it uses a broad statute to deal with the social issue of police abuse. If it is ultimately upheld it gives another tool to plaintiffs’ lawyers to gain compensation for police abuses,” he said. Blakey tried to debunk what he considers another myth about RICO, that broad reading of the law would open the floodgates to a spate of cases. In the first decade after its passage, criminal RICO prosecutions accounted for fewer than 30 cases a year and usually went after traditional organized crime such as extortion, gambling or labor racketeering, according to a Vanderbilt University report in 1990. In the early 1980s, a U.S. Supreme Court ruling that the profits from racketeering were subject to forfeitures from businesses and labor helped produce a rise in the use of the criminal law for major mafia prosecutions in New York; Chicago; Kansas City, Mo.; Cleveland; Philadelphia; and Boston. RICO was also used in a Chicago prosecution of corrupt judges, in Seattle against a neo-Nazi group and South American drug traffickers, and against former Panamanian leader General Manuel Noriega. Then it began to be applied to white-collar crime, including insider trading and bank fraud in the 1980s savings and loan scandals. Civil RICO cases remained nearly nonexistent until the 1990s, when the Supreme Court ruled for the second time that civil RICO has broad application. Blakey said RICO applies to a pattern of unlawful behavior, not simply multiple uses of the mail or phones. One explanation for the slow growth in its use, he said, is that civil litigation and RICO litigation could be compared to the difference between an internist and a brain surgeon. RICO is extremely complex, he said. And that may also account for judges and appellate courts continuing to throw up barriers to the broad application of civil RICO beyond traditional mobsters. The civil statute states that “any person injured in his business or property by reason of a violation of section 1962 [racketeering] . . . may sue . . . “What part of ‘any’ don’t they understand?” asked Blakey. “The myth [of mob only application] is like a vampire. It has to have a stake driven through its heart over and over,” he said.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.