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What’s Needed to Establish Causation in a Rico Claim in Federal Court

Poole Huffman, LLC

A recent federal appellate decision could amount to something very important to businesses that may need to pursue, or defendant against, a Racketeer Influenced and Corrupt Organizations (RICO) Act claim. The ruling potentially represents a broadening of what kind of causal linkage is direct enough to meet the causation requirement of a RICO claim, which is important because any broadening of that requirement could make for a boon to those considering pursuing a RICO case. While substantial aspects of RICO law are well-settled, some areas continue to evolve to one degree or another, which is why it always pays to have a truly knowledgeable Atlanta civil RICO lawyer on your side who’s fully up-to-date on all the changes in the law.

The RICO case that spawned the new federal court decision involved the business of high-dollar bankruptcy advice and consulting. After one company (“M”) successfully defeated the other company (“A”) in securing several of these clients, A sued M.

The crux of A’s case was that M was able to beat A for clients, in part, by “knowingly and repeatedly filing disclosure statements in the Bankruptcy Court containing incomplete, misleading, or false representations concerning conflicts of interest” and thereby rigging the process. M also allegedly erected a “pay-to-play” scheme where it arranged meetings between its clients and certain bankruptcy lawyers in exchange for exclusive referrals from those attorneys.

On that basis, A asserted a RICO claim against M. The defendant argued that it was entitled to dismissal under Federal Rule 12(b)(6) because the plaintiff had failed to state a valid RICO claim. Specifically, the defendant’s argument was that the allegations the plaintiff advanced, even if all were proven true, did not meet the standard for “proximate causation” required in a RICO claim.

The trial court agreed with the defendant (concluding that the allegations were “too remote, contingent, and indirect to sustain a RICO claim”), but the federal appeals court disagreed.

The federal RICO statute requires that a plaintiff prove that the alleged RICO violation proximately caused the injury asserted. Federal case decisions have also made it clear that the causal link between the violation and the injury needs to be “direct.” Although the plaintiff’s case required a certain amount of connecting of “the dots” to get from the defendants’ alleged malfeasance to the plaintiff’s lost business, the appeals court said that the link was direct enough.

How the Federal Courts Here in Georgia Deal With RICO’s Causation Requirement

This case occurred in New York and was decided by the federal Second Circuit of Appeals. Here in Georgia, RICO cases undertaken in federal court are guided by the 11th Circuit Court of Appeals. Back in 2014, the 11th Circuit addressed a case somewhat similar to this one before the Second Circuit.

In the 2014 case, the plaintiff and defendants were plumbing supply companies that competed to sell plumbing materials to a county government in South Florida. Two of the defendants allegedly “solicited and prepared false and misleading documents and repeatedly submitted those documents to the county for the express purposes of” obtaining a small business enterprise (SBE) certification and then winning bids based on the county’s 10% advantage it awarded to SBEs.

Because the plaintiff not only had sufficiently alleged the enterprise and the violations but also alleged that, without the defendants’ 10% advantage, the plaintiff would have won the bids because it was the next-lowest bidder, it had what it needed to establish sufficient causal linkage for a RICO claim.

What these cases tell us is that, if you have a RICO case where the connection between the violation and your injury may seem to be somewhat more remote, it is essential to make sure you have the proper allegations and the evidentiary support to “connect the dots” and draw a reasonably direct line between the violation and how your harm was the inevitable result of that violation.

Whether you need to pursue a RICO case or defend against one, you need the knowledgeable Atlanta civil RICO attorneys at Poole Huffman, LLC. Our attorneys have the specialized knowledge and the experience it takes to give you the best legal representation possible. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation today.

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