Antitrust Law Daily Wrap Up, RICO—5th Cir.: Former employee fails to state RICO claim against NAACP over alleged improprieties in grant funding, (Oct 9, 2013)

By Tobias J. Gillett, J.D., LL.M.

A former NAACP attorney failed to state a RICO claim against the organization, its Houston branch, and the branch’s Executive Director, because she did not establish that her injury, the branch’s inability to comply with a National Labor Relations Board (NLRB) order to reinstate her, was proximately caused by alleged acts of mail and wire fraud committed in connection with grants that previously funded her position, the U.S. Court of Appeals in New Orleans has ruled (Jackson v. National Assn. for the Advancement of Colored People, October 8, 2013, per curiam).

Tracie Jackson worked for the Houston branch of the National Association for the Advancement of Colored People (NAACP), in a position funded by grants from the Texas Access to Justice Foundation (TAJF). In June 2010, branch employees were informed by the branch’s Executive Director, Yolanda Smith, that the branch would be unable to make payroll, and that the grant monies had been pooled with other funds to pay for branch expenses. Jackson was terminated in August 2010 when the funding for the grants expired, and was denied when she reapplied for a position.

Jackson had reported her concerns about the pooling of the grant funds to the director of the TAJF and the President of the branch. Audits of the branch by the Texas Workforce Commission and the NAACP revealed improprieties with grant expenditures, the branch’s accounting system, and other branch activities. In July 2011, the NLRB ruled that the Branch had committed an unfair labor practice by refusing to re-hire Jackson because of her complaints about the lack of funds for payroll. Although the NLRB ordered that she be reinstated and paid back pay, the TAJF had previously denied grants to the branch after finding it had not abided by the terms that governed the grant money, and therefore the branch was unable to reinstate her.

Jackson filed suit against the NAACP, the Houston branch, and Smith, alleging claims for violations of the RICO Act and various state law claims, and later added another attorney as an additional plaintiff. The magistrate judge issued a report dismissing their claims, which was adopted in full by the district court. Jackson and the other attorney appealed.

The appellate court affirmed the dismissal of their RICO claims. The court explained that a RICO plaintiff must establish both an injury to the plaintiff’s business or property, and that the injury was caused by a violation of the RICO Act.

Here, Jackson alleged an injury from the branch’s loss of its grant funding and consequent inability to reinstate her. Even if her interest in the NLRB order was sufficient to confer standing for RICO purposes, the cause of her “asserted harm (the Branch’s inability to reinstate her) [was] an action entirely distinct from the alleged RICO violations (the predicate acts of wire and mail fraud by Smith against TAJF).” If anyone, the branch and the TAJF were the direct victims of the alleged RICO activity, not Jackson. Jackson’s injury did not “flow from” the alleged mail and wire fraud committed against TAJF because TAJF pulled its funding primarily due to acts unrelated to the predicate RICO acts, and even if it had pulled its funding due to the predicate acts Jackson’s injury was “proximately caused only by the discovery of these acts by the TAJF and the consequences following this discovery, not by the alleged RICO violations.”

“A combination of independent causal factors led to Jackson’s NLRB order and the Branch’s inability to reinstate her, and Jackson was neither the victim nor the target of the RICO activity,” the court found.

The case is No. 12-20399.

Attorneys: Tracie J. Jackson (Frye, Steidley, Oaks & Benavidez) for Tracie J. Jackson and Linda Dunson. Alfred John Harper, II (Morgan, Lewis & Bockius, L.L.P.) for National Association for the Advancement of Colored People. William L. Van Fleet (Hall Law Firm) for NAACP Houston Branch and Yolanda Smith.

Companies: National Association for the Advancement of Colored People

Cases: RICO LouisianaNews MississippiNews TexasNews