Civil RICO: A Powerful Tool Against Patterns of Unlawful Conduct

Stephen D. Britt

The Racketeer Influenced and Corrupt Organizations Act (commonly known as "RICO") brings to mind criminal underworld bosses and mafiosos. There is good reason for this: Congress originally enacted RICO as part of the Organized Crime Control Act of 1970 to combat organized crime and its infiltration of legitimate business enterprises.

What many people do not realize, however, is that RICO also includes a civil provision that permits private parties to sue groups of defendants for engaging in a criminal enterprise. These civil RICO claims serve as a formidable litigation tool for private plaintiffs in commercial and fraud-related disputes. A civil RICO claim1 permits any person injured in his or her business or property by reason of illegal racketeering activity to recover treble damages, costs, and reasonable attorney's fees. These enhanced remedies make civil RICO a powerful mechanism for plaintiffs seeking to address and deter systematic wrongful conduct.

The RICO Statutory Framework

The RICO statute2 sets forth four distinct prohibitions that form the substantive basis of a RICO claim. The first3prohibits using income derived from a pattern of racketeering activity to acquire an interest in or operate an enterprise engaged in interstate commerce. The second4 prohibits acquiring or maintaining an interest in an enterprise through a pattern of racketeering activity. The third, 5 and most frequently invoked provision, prohibits participating in the conduct of an enterprise's affairs through a pattern of racketeering activity. The fourth6 prohibits conspiring to violate any of these subsections.

Critically, the civil enforcement mechanism provides a private right of action to "[a]ny person injured in his or her business or property by reason of a violation of section 1962." This language grants injured parties standing to assert claims against participants in the enterprise, but it also requires plaintiffs to demonstrate that their injuries were proximately caused by the alleged racketeering activity.

Elements of a Civil RICO Claim

To prevail on a civil RICO claim, a plaintiff must establish four essential elements:

The existence of an enterprise;

That the defendant conducted or participated in the conduct of the enterprise's affairs;

Through a pattern of racketeering activity; and

That the plaintiff suffered an injury to business or property by reason of the RICO violation.

For purposes of RICO, an "enterprise" is broadly defined7 to include "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." The U.S. Supreme Court has held that an association-in-fact enterprise requires only a common purpose, relationships among those associated with it, and sufficient longevity to permit the associates to pursue the enterprise's purpose. 8The enterprise, however, must be distinct from the defendant9; thus, a corporation cannot be both the "enterprise" and the person liable for conducting its affairs through racketeering activity.

The second element requires that the defendant have "conducted or participated in the conduct" of the enterprise's affairs. To guide application of this language, the Supreme Court adopted the "operation or management" test.10 Under this standard, a defendant must participate in the operation or management of the enterprise itself to incur liability. This requirement limits RICO liability to those who play some role in directing the enterprise's affairs, even if they do not hold formal managerial titles.

The third element, a "pattern of racketeering activity," requires at least two predicate acts within a ten-year period.11These predicate acts encompass a broad range of state and federal offenses, including mail fraud, wire fraud, bank fraud, extortion, bribery, money laundering, and other crimes. The Supreme Court has clarified that, to demonstrate a "pattern," a plaintiff must show that the predicate acts are related and amount to, or pose a threat of, continued criminal activity.12 This "continuity plus relationship" requirement ensures that RICO targets ongoing criminal conduct, rather than isolated acts.

The fourth element requires a concrete injury to business or property caused by the defendant's RICO violation. The Supreme Court has emphasized that the injury must be directly caused by the predicate acts, rather than being a remote consequence of the alleged misconduct.13 This proximate-cause requirement limits civil RICO claims to direct victims of racketeering activity.

Purpose and Policy Considerations

Civil RICO serves several important policy objectives. First, it enlists private plaintiffs as "private attorneys general" in the fight against organized and systematic criminal conduct by offering the incentive of treble damages and attorney's fees. Second, it provides a remedy for victims of ongoing fraudulent schemes that might otherwise be inadequately addressed through common-law fraud claims or isolated criminal prosecutions. Third, the statute's broad reach deters enterprises from engaging in patterns of criminal behavior by imposing substantial financial consequences.

Because civil RICO's expansive scope has led to its use in cases far removed from traditional organized crime, courts have developed limiting doctrines to act as gatekeepers. These include the "distinctness" requirement, the "operation-or-management" test, and strict proximate-causation standards. Courts also apply heightened scrutiny at the pleading stage, especially in cases involving fraud, requiring plaintiffs to plead predicate acts with particularity.

Conclusion

Civil RICO remains one of the most powerful statutory tools available to private litigants and businesses seeking redress for injuries caused by patterns of unlawful conduct involving multiple actors. The statute enables plaintiffs to pursue significant remedies against those engaged in coordinated wrongdoing.

Nevertheless, given the stringent requirements imposed by courts, parties considering civil RICO claims must carefully analyze and plead each element. Courts rigorously scrutinize these claims to ensure that civil RICO remains focused on the type of ongoing, structured criminal activity Congress intended to eradicate.

Footnotes

Civil RICO claims are codified at 18 U.S.C. § 1964(c). ↩

18 U.S.C. § 1962. ↩

18 U.S.C. § 1962(a) ↩

18 U.S.C. § 1962(b) ↩

18 U.S.C. § 1962(c) ↩

18 U.S.C. § 1962(d) ↩

18 U.S.C. § 1961(4) ↩

Boyle v. United States, 556 U.S. 938 (2009). ↩

18 U.S.C. § 1962(c) ↩

Reves v. Ernst & Young, 507 U.S. 170 (1993), ↩

These acts are defined in 18 U.S.C. § 1961(1) ↩

H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989) ↩

Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (1992). ↩