Beginnings of Success Using Federal Racketeering Statute to Combat Fraudulent Lawsuits

As this blog reported earlier this month, national freight and railroad company, CSX Transportation, recently succeeded in using the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) to obtain triple damages from a Pennsylvania law firm that brought a slew of fraudulent asbestos lawsuits against it. Now, multinational energy corporation, Chevron, looks to follow on the heels of CSX’s success in an action against noted Manhattan plaintiffs’ attorney, Steven Donziger, for bringing an allegedly fraudulent environmental lawsuit against the company in Ecuador that cost Chevron around $19 billion.

The much anticipated Chevron trial began in the Southern District of New York in mid-October. At trial thus far, Chevron has encountered some difficulties making out its RICO claim; Chevron has dropped its claim for triple damages in an effort to obtain a trial by a judge rather than by a jury. But if Chevron can successfully prove its fraud and racketeering claims against Donziger, the concept of employing RICO as not only a punishment for fraudulent lawsuits, but also as a deterrent, may spread to more and more companies, including smaller ones.

The theory behind RICO suits like CSX’s and Chevron’s is that the plaintiffs firms conspired with attorneys, consultants, experts, and sometimes others (like environmental activists in Chevron’s case) to “shake down” the plaintiff companies with meritless lawsuits. Companies like CSX and Chevron may have decided to turn to RICO because they found they had nowhere else to turn to obtain justice after being forced to spend millions defending unfair or meritless lawsuits. The concept has successfully been applied in the asbestos litigation context and it may yet be successful in the environmental litigation context. Conceivably, the concept could be useful in other contexts as well, including other product liability contexts, malpractice contexts, and other mass tort contexts. Although the idea of employing a federal racketeering statute to combat or deter fraudulent lawsuits may be only in its infant stages, it may be a trend worth watching for companies that frequently find themselves defending massive or repetitive costly lawsuits.

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