Antitrust Law Daily Wrap Up, RICO—D. Colo.: Canadian law firm not liable for employee’s participation in conspiracy, (Jan 14, 2016)

By Greg Hammond, J.D.

A real estate development company failed to state a Racketeer Influenced and Corrupt Organizations Act (RICO) claim against a Canadian law firm after one of its attorneys provided a reference for a lending company and the developer’s loan was rejected after the developer paid $200,000 to the lender. The federal district court in Denver granted the law firm’s motion to dismiss the RICO claim, finding that there were no facts showing that the firm agreed to or intended to further its employee’s alleged RICO fraud scheme with the lender (OCD Telluride LLC v. Blaney McMurtry LLP, January 13, 2016, Tafoya, K.).

OCD Telluride—a company that was organized to develop a real estate project in Colorado—attempted to obtain a $20 million loan from First Central Mortgage Funding, Inc. One of Canadian law firm Blaney McMurtry LLP’s employees provided a reference for First Central and OCD subsequently paid more than $200,000 in fees to First Central. Nevertheless, First Central refused to fund the loan based on allegedly “pretextual reasons.” OCD opted out of a class action settlement with Blaney and brought RICO claims against Blaney, claiming that the Canadian law firm was vicariously liable for its employee’s actions. Blaney moved to dismiss the RICO claims.

Vicarious liability, knowing participation. The court granted Blaney’s motion to dismiss, finding that the doctrine of respondeat superior would disrupt the explicit statutory scheme of § 1962(c) and that a claim for RICO conspiracy requires knowing participation in the conspiracy. Consequently, the court rejected the theory that Blaney’s employee’s activities could be imputed to Blaney to create RICO liability. In addition, the court found: (1) the employee could not have agreed to actually join the conspiracy within the course and scope of his employment with Blaney because he had been an alleged member of the conspiracy for many years prior to his association with Blaney; (2) the complaint contained no allegations that Blaney knew of the alleged racketeering acts of First Central’s owner or the alleged conspiracy involving Blaney’s employee; and (3) the complaint affirmatively asserted that Blaney did not know of the lender’s illegal activities.

The case is No. 13-cv-02584-KMT.

Attorneys: Corey Thomas Zurbuch (Oates Knezevich Gardenswartz Kelly & Morrow, PC) for OCD Telluride LLC. Daniel David Williams (Faegre Baker Daniels LLP) for Blaney McMurtry LLP.

Companies: OCD Telluride LLC; Blaney McMurtry LLP

Cases: RICO ColoradoNews