Civil RICO Litigation in California and Florida

Congress wrote the Racketeer Influenced and Corrupt Organizations Act with organized crime in mind, but its civil remedy reaches any enterprise run through a pattern of fraud. A person injured in his business or property by a RICO violation may sue in federal court and recover three times his damages, plus costs and a reasonable attorney's fee. 18 U.S.C. § 1964(c). Reiser Law, P.C. brings and defends civil RICO claims in federal courts in California and Florida and in other districts, and pursues claims under Florida's own civil RICO statute.

What a civil RICO claim requires

Section 1962 contains four prohibitions. It bars investing racketeering income in an enterprise, acquiring or maintaining control of an enterprise through racketeering, and conducting or participating in the conduct of an enterprise's affairs through a pattern of racketeering activity. It also bars conspiring to do any of those things. 18 U.S.C. § 1962(a)-(d). Most civil cases are brought under subsections (c) and (d).

A pattern requires at least two acts of racketeering activity, the last within ten years of a prior act. 18 U.S.C. § 1961(5). The list of qualifying acts includes mail fraud, wire fraud and bank fraud, which is why so many commercial fraud schemes fit the statute. 18 U.S.C. § 1961(1). Two acts are not enough on their own. The plaintiff must show that the acts are related and that they amount to or pose a threat of continued criminal activity. H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989). Because the predicate acts are usually fraud, they must be pleaded with particularity under Federal Rule of Civil Procedure 9(b).

The securities fraud exception

Federal RICO has an important carve-out. A plaintiff may not rely on conduct that would have been actionable as fraud in the purchase or sale of securities to establish a RICO violation, unless the defendant was criminally convicted in connection with the fraud. 18 U.S.C. § 1964(c). Many investment fraud cases therefore proceed under the securities laws rather than RICO, and choosing the right framework is one of the first decisions in an investor case.

Florida's civil RICO statute

Florida's Civil Remedies for Criminal Practices Act, chapter 772 of the Florida Statutes, provides a state-law counterpart. A person who proves by clear and convincing evidence that he was injured by a violation of section 772.103 may recover threefold actual damages, with a minimum of $200, plus reasonable attorney's fees and court costs. Fla. Stat. § 772.104(1). Punitive damages are not available under that section, and a defendant may recover its own fees if the claim lacked substantial factual or legal support. Fla. Stat. § 772.104(3). An action may be brought within five years after the violating conduct ends or the claim accrues. Fla. Stat. § 772.17.

California has no general civil RICO statute of its own. RICO claims arising in California are brought under the federal statute, usually alongside fraud, conspiracy and Unfair Competition Law claims.

Weighing a RICO claim

Treble damages and fee recovery make RICO a powerful tool, and courts know it. Judges scrutinize RICO pleadings closely, and a weak RICO count can invite an early motion that slows the whole case. In Florida state court, a claim without substantial support can also shift the defendant's fees to the plaintiff. We advise clients candidly on whether a RICO count adds real value or whether fraud, contract and statutory claims will get to the same recovery with less risk. We also defend companies and individuals facing RICO allegations.

Our experience

We served as co-lead counsel in federal court for three life insurance policyholders and their employer in claims for RICO, RICO conspiracy, fraud and rescission arising from the marketing of a tax shelter built around whole-life insurance policies. The case resolved by settlement. We also took to trial in federal court in Florida a fraud case against a life insurer that sold policies to small business owners through employee benefit plans, and the insurer agreed to a confidential settlement after we presented the evidence. Our investor fraud and fiduciary duty work often involves the same kinds of schemes. See our representative cases.

Questions clients ask

Can a business sue under RICO?

Yes. Any person injured in its business or property by a RICO violation can sue, and that includes companies. Personal injuries are not recoverable under the federal civil remedy.

What is an enterprise?

An enterprise can be a corporation, partnership or other legal entity, or an informal group of people associated in fact. 18 U.S.C. § 1961(4). In a claim under subsection (c), the defendant must be distinct from the enterprise whose affairs it conducts, which is a common battleground in pleading motions.

Can I bring a RICO claim for an investment fraud?

Usually not under federal RICO, because of the securities fraud exception, unless the defendant was criminally convicted. Securities and state-law fraud claims are the usual path. Florida's chapter 772 claim should be evaluated separately.

Talk to us

For California matters, call (925) 256-0400 or email Michael J. Reiser at michael@reiserlaw.com. For Florida matters, call (305) 726-2003 or email Matthew W. Reiser at matthew@reiserlaw.com; Spanish speakers can write to Isabella Martinez at isabella@reiserlaw.com. You can also use our contact page.

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