How RICO Plays a Role in the World of Harvey Weinstein and #MeToo

Overcoming Obstacles

Who in civil litigation does not love a good RICO claim? Its boundaries are seemingly endless, and in the case of Harvey Weinstein—perhaps one of the most vilified defendants on the planet right now—there is the possibility of catastrophic implications, as if being the face of an entire movement (#MeToo) is not bad enough.

Civil claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sections 1961-1968 (RICO Act), are highly desirable for plaintiffs and their attorneys because, if successful, they provide for treble damages, plus attorney fees and costs of litigation. Very few plaintiffs succeed on a RICO claim, however, so the decision to file one should not be made lightly. Many plaintiffs fail during the pleadings stage, and their claims are dismissed under Rule 12(b)(6). For defendants, like Weinstein, the possible implications of RICO can be disastrous. This potential implication is why defendants of civil RICO claims are eager to settle if the claim survives a motion to dismiss and shows a strong likelihood of surviving a motion for summary judgment. For example, in 2016, Trump University did just that—it settled a civil RICO suit for $25 million, which paled compared to its potential exposure of $170 million.

Background

The RICO Act was passed in 1970 as part of the Organized Crime Control Act of 1970 to combat large organized crime operations led by the American Mafia and their growing infiltration of legitimate businesses and organizations. Although the RICO Act was drafted to bring down gangsters, it is certainly not limited to that purpose and has evolved into a mechanism to confront business fraud and corruption over the last half-century. This is evidenced by the recent high-profile civil RICO lawsuit filed against Harvey Weinstein.

The Weinstein RICO Action

On Dec. 6, 2017, a proposed class-action lawsuit was filed on behalf of six women in New York against former Hollywood movie mogul, Harvey Weinstein and others. The plaintiffs represent a proposed class of hundreds of actresses who claim they suffered sexual assault, false imprisonment, battery, rape and other “predicate acts.” In a 300 paragraph, 104-page complaint, the plaintiffs allege that “over time Weinstein enlisted the aid of … other firms and individuals, to facilitate and conceal his pattern of unwanted sexual conduct. This coalition of firms and individuals became part of the growing 'Weinstein Sexual Enterprise,' a RICO enterprise.” The plaintiffs allege that the defendants violated the RICO Act through patterns of racketeering activity involving predicate acts of witness tampering and mail and wire fraud (the most common predicate acts) that restricted them and others from getting additional work in the field.

The Difficulties of Pleading and Proving Civil RICO Claims

In a survey of 145 appellate decisions between 1999 and 2001 that involved RICO civil actions, about 70 percent were dismissed on defendants' motions to dismiss or for summary judgment. Where the appellate courts addressed the RICO matter, 80 percent of the rulings were for the defendants. Of the 9.6 percent of the suits in which plaintiffs obtained a favorable verdict after a jury trial, only 25 percent of the judgments were affirmed on appeal. Only three out of those 145 cases surveyed resulted in a victory for the plaintiffs. See Pamela H. Bucy, “Private Justice,” 76 S. Cal. L. Rev. 1, 22 (2002).

The struggle for plaintiffs to come out on top of a RICO claim comes from many problems regarding the strict requirements of the RICO Act. Two of the most difficult challenges plaintiffs face in bringing a successful civil RICO claim are meeting the heightened pleading standards under Rule 9(b) and establishing proximate cause.

The Heightened Pleading Standard Under FRCP 9(b) for Predicate Acts

The hardest hurdle to a successful RICO claim is the heightened standard of pleading under Rule 9 for predicate acts based on fraud (mail fraud, wire fraud, bank fraud, etc.). Rule 9(b) requires the plaintiff to allege the circumstances constituting fraud with particularity. Some courts made this challenge even more onerous. The Second Circuit, for instance, held that Rule 9(b) requires fraud complaints to allege facts that lead to a “strong inference” that the defendant has the requisite state of mind even though Rule 9(b) provides that conditions of a person's mind may be alleged generally, see, e.g., IKB International v. Bank of America, 584 Fed. App'x. 26, 27 (2d Cir. 2014) (“We have repeatedly required plaintiffs to plead the factual basis which gives rise to a strong inference of fraudulent intent.”); Babb v. Capitalsource, 588 Fed. App'x. 66, 68-9 (2d Cir. 2015) (upholding dismissal of civil RICO claim where plaintiff failed to allege facts giving rise to a strong inference of fraudulent intent).