Complex Litigation: RICO Class Actions

Abstract

This paper is a commentary and analysis of creative efforts of plaintiffs class action attorneys to pursue relief under the federal RICO statutes, 18 U.S.C. §§ 1961-68, (Racketeer Influenced and Corrupt Organization Act). Congress enacted RICO originally to address provide sanctions for criminal enterprise activities, but class counsel have imaginatively employed RICO statutes to create massive civil litigation against entire industries, pleading various fraud claims. This article explores the potential advantages to pleading RICO claims and pursuing relief under this statute. Pursuing RICO claims provides a basis for certifying a class action that otherwise might not be certifiable if pursued solely under state-based fraud theories. There is a conflict among federal courts concerning whether, in pleading a federal RICO fraud claim, the plaintiffs’ need to prove individual reliance defeats the ability to certify a class under the Rule 23(b)(3) predominance requirement. The article discusses the Fifth Circuit Court of Appeals decision in Sandwich Chef of Texas, Inc. v. Reliance Nat’l Indemnity Inc. Co., 319 F.3d 205 (5th Cir. 2003), in which the court concluded that a RICO claim does not permit presumed reliance to overcome the predominance requirement of Rule 23(b)(3), and the conflicting Eleventh Circuit decision in which the court has held to the contrary Klay v. Humana Inc., 382 F.3d 1241 (11th Cir. 2004).

Keywords: RICO class actions, 18 U.S.C. 1964-68, Sandwich Chef of Texas Inc. v. Reliable Nat'l Indemnity Ins. Co., Kaly v. Humana Inc., class action litigation, Rule 23(b)(3) predominance