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Civil RICO

Corrupt business practices are growing in this tough economy (Civil and Criminal RICO laws should be looked at in every case).

This is an abbreviated overview of the RICO statute and case law.  There are many specific legal requirements that apply to this law and the best thing to do is to contact our law firm to arrange time to discuss your case.  See information below.

“RICO” is the “Racketeer Influenced Corrupt Organizations Act.”  This used to be a law that applied only to the mobsters and other corrupt organizations.  However,  In this tough economy, there are thousands of companies acting in very aggressive and unprecedented manners in an apparent attempt to “shake down” small companies and in some cases threatening without any legal justification to “shut down” your company.

Some examples of this are “Copyright Trolls” who threaten you or your company with a federal copyright lawsuit for having a picture or thumbnail image on your website, or software companies that demand you stop your business and provide them a full accounting of all your installed software that you have hosted on all your computers, laptops, servers and the like.

These companies may come under the guise of a “license agreement” or under the color of state law (some people think the demands are coming from companies with law enforcement ability to arrest them).

Some companies, particularly software companies, will claim their “shrinkwrap” or “clickwrap” software licenses give them a right to bully you into financial submission.  When you ask to see the licensing agreement that compels such a conclusion, often you will not get a copy (sorry, we cannot show you that) or words to that effect.

Civil Rico Statutes

Now, I am not suggesting that every BSA or software licensing audit constitutes a violation of the Civil Rico statutes, but what I am saying is that all conduct of the SIIA, BSA or other software companies that want to audit you (or federal copyright holder that claims you are an infringer of their federal trademarks) needs to be examined closely.

Let’s examine some case law in this area to get a better understanding of what Civil RICO law.

Private Attorney Generals

It has been said that “the object of civil Racketeer Influenced and Corrupt Organizations Act (RICO) is not merely to compensate victims but to turn them into prosecutors, that is, private attorneys general, dedicated to eliminating racketeering activity.”  See 10 Am. Jur. Proof of Facts 3d 289.

What is the Purpose of Civil RICO claims?

The major purpose of RICO is to protect legitimate business enterprises from infiltration by racketeers and term “enterprise” therefore includes legitimate corporations; further, RICO does not require that pattern of racketeering be in furtherance of enterprise and activity may be to detriment rather than benefit of enterprise. See Aetna Casualty Sur. Co. v P & B Autobody (1994, CA1 Mass) 43 F3d 1546.

There must be at least two acts of racketeering (predicate acts)

A “pattern of racketeering activity,” under Racketeer Influenced and Corrupt Organizations Act (RICO) provision prohibiting conduct of enterprise’s affairs through a pattern of racketeering activity, requires at least two acts of racketeering activity; while two acts are necessary, they may not be sufficient. 18 U.S.C. § 1962(c). See also Gotfredson v. Larsen LP, 432 F. Supp. 2d 1163.
Note: Section 18 U.S.C.(b): “It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.”  This means the activities of those claiming to be “debt collectors” must be examined closely as we discuss in our FDCPA page.

What are the Predicate Acts for Civil RICO?

Section 18 U.S.C. 1961 lists a whole slew of predicate acts that can serve as predicate acts under Civil RICO.  One common one will involve mail and wire fraud which is described in Sun Sav. and Loan Ass’n v. Dierdorff (9th Cir. 1987) 825 F.2d 187, 195 as:
“The mail fraud statute, 18 U.S.C. § 1341, imposes criminal liability upon anyone who devises “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations or promises,” and uses the United States mails “for the purpose of executing such scheme or artifice or attempting so to do.” To allege a violation of the mail fraud statute, plaintiff must show that:
(1) defendant devised a scheme or artifice to defraud,
(2) defendant used the mails in furtherance of the scheme;
(3) defendant did so with the specific intent to deceive or defraud. Schreiber, 806 F.2d at 1399, 1400.

Wherever you have the use of the mails (such as a demand letter from an attorney or collection agency of from a “software compliance group” (that turned out to be what we believe to be an offshore software compliance scam), you have to look closely at the facts of your case to see what is going on.  Contact a FDCPA / CIVIL RICO lawyer to review your case.

Software licensing audits often contain a threat of future audits by other software member companies

This issue is addressed in an FDCPA / RICO lawsuit in Turner v. Cook (9th Cir. 2004) 362 F.3d 1219, 1229 which discussed:

“Thus, in order to allege open-ended continuity, a RICO plaintiff must charge a form of predicate misconduct that “by its nature projects into the future with a threat of repetition.”

Taking money by false pretenses

In Scheidler v. National Organization for Women, Inc. (2003) 537 U.S. 393, 402-03 [123 S.Ct. 1057, 1064, 154 L.Ed.2d 991], the United States Supreme Court discussed:
“At common law, extortion was a property offense committed by a public official who took “any money or thing of value” that was not due to him under the pretense that he was entitled to such property by virtue of his office. In 1946, Congress enacted the Hobbs Act, which explicitly “expanded the common-law definition of extortion to include acts by private individuals.” Evans v. United States, 504 U.S. 255, 261, 112 S.Ct. 1881, 119 L.Ed.2d 57 (1992) (emphasis deleted). While the Hobbs Act expanded the scope of common-law extortion to include private individuals, the statutory language retained the requirement that property must be “obtained.” See 18 U.S.C. § 1951(b)(2).”

Civil Rico extortion cases

Another case discussed RICO civil fraud “extortion” requirements was First Pacific Bancorp, Inc. v. Bro (9th Cir. 1988) 847 F.2d 542, 547:
“Finally, appellants assert that the shareholder derivative suit and alleged “threats” made to a bank director constitute acts of “extortion” under RICO, 18 U.S.C. § 1961(1)(A). The proposed shareholder derivative suit was neither served nor filed. Appellants concede that it was not a catalyst for any corporate action. Accordingly, it is not an extortionate act. Moreover, it does not qualify as a “predicate act” for RICO purposes (threat of litigation not predicate act for RICO purposes).
The alleged “threats” are insufficient. Extortion by threat requires “fear.” Fear was neither alleged nor discernible from the director’s declaration. In addition, even if the director’s declaration established fear, it failed to identify any corporate action which the imposition of fear might have been intended to compel. Absent such support, the allegation of extortion collapses.

Can a law firm’s demand letter be considered unethical and an act of extortion?

Ethics of Attorney Demand Letters – The California State Bar provides that:
“an attorney should avoid tactics that that are abusive, that are not made in good faith, that threaten inappropriate legal action, that are not true, or that are intended solely to gain an unfair advantage or take unfair advantage of a superior bargaining position.  
Attorneys need to keep their business in check as well, even when advocating for their clients.  For example, as the above article notes:
The crime of extortion by threatening letter requires: 
(1) defendant sent or delivered a threatening letter or writing to another person, 
(2) defendant intended to use fear to obtain money or property with the other person’s consent and 
(3) in the writing, the defendant threatened to:
      (a) injure unlawfully the person or property of the victim, 
     (b) accuse the victim of a crime,
     (c) expose a secret about the victim, or connect the victim or the victim’s family with a “disgrace, crime, or deformity.
The threat can be directly stated in the writing, or can be implied by the contents of the writing and the surrounding circumstances, or can be intended by the sender to be understood as a threat by the recipient.
So if you are faced with an Attorney demand letter (sometimes these are made in the context of being a “debt collection” letter raising FDCPA issues) that appears to exceed all bounds of decency, you should contact our firm to discuss the situation.

What are the damages and penalties for a RICO violation?

RICO, which empowers both prosecutors and private enforcers, imposes severe criminal penalties and hefty civil liability on those engaged in conduct within the Act’s compass. See, e.g., § 1963(a) (up to 20 years’ imprisonment and wide-ranging forfeiture for a single criminal violation); § 1964(a) (broad civil injunctive relief); § 1964(c) (treble damages and attorneys’ fees for private plaintiffs).


Civil RICO can be added as a cause of action against anyone who commits the required predicate acts, and can be asserted as a Complaint on behalf of a Plaintiff or by a Defendant filing a countersuit or cross claim against another Defendant.  While Civil RICO is a case that needs to be plead only when the cause of action applies, with the amount of aggressive anti-social corporate behavior going on, this cause of action needs to be looked at closely.

Contact a Civil RICO Attorney

To discuss your case, whether a simple civil case or a “bet the farm” litigation case, we can help.  Call our Civil Litigation Attorneys can be reached at (877) 276-5084 or fill out the form below.  The initial call is always free, and we offer flexible fee structures to help you get the representation you or your company needs.