Spiraling out of control: ramifications of reading RICO broadly.

• Author: Feldman, Neil

Both the statute's broad terms and the tendency by courts to give those terms a broad reading have unloosed a cannon

WHEN Congress enacted Title IX of the Organized Crime Control Act of 1970, better known as the Racketeer Influenced and Corrupt Organizations Act (RICO), which is codified in various sections of Title 18 of the U.S. Code, the specific target was organized crime. By significantly curtailing the influence of the criminal underworld on American business, Congress thought that over time it could break up organized crime's nucleus--a solid economic base.(1)

Although RICO has both civil and criminal provisions, the latter substantially dominated its decisions before 1980. One reputable task force could locate only nine civil RICO decisions during the statute's first decade.(2) Since 1980, however, RICO has been applied to far more than criminal prosecutions. The majority of civil RICO suits since 1980 involve either common law commercial fraud or securities fraud, and some courts have allowed the application of RICO to such areas as antitrust violations(3) and suits involving abortion protesters.(4)

What makes RICO so extreme and has alarmed many practitioners and scholars is the treble damages that it allows civil plaintiffs to collect. 18 U.S.C. [sections] 1964(c). One prominent critic was Justice Thurgood Marshall, who noted in a dissenting opinion in Sedinta S.P.R.L v. Inrex Co., "Many a prudent defendant, facing ruinous exposure, will decide to settle even a case with no merit." He added that "civil RICO has been used for extortive purposes, giving rise to the very evils that it was designed to combat."(5)

How has a statute initially intended to combat organized crime grown to encompass so many diverse areas of civil lawsuits that it has become a potent weapon for private litigators and in some instances a threat to First Amendment rights? What can be done to bring RICO down to a more narrow and less potent level? These are questions that form the crux of this article. The drama begins in the early drafting stages of the statute, where certain language used in RICO would prove to be crucial in its later applications. Although it seems clear lawmakers intended RICO to apply exclusively to organized crime, many key terms in the statute were articulated broadly and subsequently interpreted with minimal restrictions. Commercial fraud and abortion protester suits are two illustrations of how RICO has penetrated areas of the law far removed from organized crime. The statutory terms "enterprise" and "pattern of racketeering" have been read broadly and are largely the reason why RICO has been applied successfully in numerous areas of civil litigation.

Civil RICO in its present form is a powerful weapon because of the treble damages that plaintiffs are awarded automatically. The statute must be reevaluated to eliminate floods of lawsuits that do not warrant such excessive damages.

RICO'S LEGISLATIVE HISTORY AND DEVELOPMENT

The introduction of the bill that led to RICO came in the wake of several investigations undertaken by national commissions that scrutinized organized crime's economic operations. The commissions I findings emphasized the difficulties in preventing organized crime from getting its hand in legitimate business and labor union activities and noted that money was the ultimate mechanism of power.(6)

In January 1969, when Senator John L. McClellan introduced the bill that would become the Organized Crime Control Act of 1970, he echoed the commissions.(7) Three months later, Senator McClellan, along with Senator Roman L. Hruska, introduced SB 1861, the Corrupt Organizations Act, RICO's forerunner.(8) In addition to reiterating the necessity to prevent organized crime's infiltration into legitimate businesses and labor unions, SB 1861 a so delineated certain impermissible activities, specifically to acquire, control or operate businesses, labor unions or other organizational entities through racketeering conduct. During deliberations of the Senate Judiciary Committee's Criminal Law and Procedures Subcommittee, which Senator McClellan chaired, SB 1861 was integrated as Title IX of the Organized Crime Control Act.

Finding new ways to curb organized crime for economic reasons was a principal objective, according to the Senate report on the bill.(9) Organized crime's power, it was stated, came from money acquired through various methods of exploitation, and that money was attained via unlawful acts such as dealing in narcotics and loan sharking. This was the money that was to percolate into legitimate businesses and labor unions. The report noted that the means by which this principal objective was to be accomplished was "by strengthening the legal tools in the evidence gathering process, by establishing new penal prohibitions, and by providing enhanced sanctions and new remedies to deal with the unlawful activities of those engaged in organized crime."(10)

Following three days of Senate debate, there was still no private treble damages in RICO. Suing for civil damages and equitable relief was a privilege only the government had.(11) Of particular importance was the definition of "racketeering" that emerged from the Senate debates. "Racketeering activity" was to include "those crimes most often associated with organized crime, especially those associated with the infiltration of legitimate organizations."(12) The crimes mentioned were "murder, kidnapping, gambling, arson, robbery, bribery, extortion, narcotic violations, counterfeiting, usury, mail fraud, bankruptcy fraud, wire fraud and securities fraud, and obstruction of justice."

The bill went to the House of Representatives in May 1970, and in the following month, a successful amendment to RICO was introduced by Arizona Representative Sam Steiger to provide a treble damages private right of action.(13) The American Bar Association asserted its support of treble damages and a private right of action,(14) and the bill with amendments was reported by the House Judiciary Committee in September 1970.

In addition to the treble damages private right of action, other provisions added by the amendment created stricter licensing provisions for using explosives, increased the consequences for intentional abuse of the privilege of using explosives, and decreed that bombing federally owned property or property receiving financial assistance from the government (e.g., hospitals, parks and universities) was a criminal offense.(15)

From its inception in 1969, there was never an indication that RICO was to extend even minimally beyond the scope of economically induced crimes. Crimes created by the Organized Crime Control Act were kept separate from RICO. This was highlighted during floor debates, such as when Representative Fernand J. St. Germain stated that explosives were an anti-bombing rather than an anti-organized crime law.(16) The inclusion of...