Antitrust Law Daily Wrap Up, RICO—D. Kan.: Threat of “aggressive tactics” does not prove pattern of racketeering activity, (Sep 18, 2014)

By Greg Hammond, J.D.

Two companies failed to state sufficient Racketeer Influenced and Corrupt Organizations Act (RICO) claims against another business, for allegedly engaging in aggressive collection practices after a settlement agreement was reached. In dismissing the RICO claim, the federal district court in Kansas City, Kansas, determined that the plaintiffs failed to adequately demonstrate a threat of continuing activity (PTI Group, Inc. v. Gift Card Impressions, LLC, September 16, 2014, Murguia, C.).

In March 2012, PTI Group, Inc. and Group Services Limited (GSL) entered into a settlement agreement with Gift Card Impression, LLC (GCI) and Brett Glass, in which GSL agreed to pay GCI over $100,000, and the companies all agreed not to disparage each other. Since then, Glass sent various letters to the co-founder of GSL, accusing GSL of not being accurate and honest, and requesting additional money. Glass also communicated with other businesses, disparaging GSL, and sent “collectors” to GSL’s Hong Kong office, where they “aggressively menaced GSL’s employees,” and implied that if $140,000 was not paid within a week, additional men would arrive and use “even more aggressive tactics.” GSL filed suit, alleging RICO violations, and GCI moved to dismiss.

To state a valid RICO claim, GCI was required to plead: (1) investment in, control of, or conduct of (2) an enterprise (3) through a pattern (4) of racketeering activity. To demonstrate a pattern of racketeering activity, a plaintiff must show (1) a relationship between the predicate acts and (2) the threat of continuing activity. Further, a threat of continuing activity may be established by either closed-ended or open-ended continuity.

The court determined that GCI never alleged that the actions of Glass, GCI, or the collectors continued over a substantial amount of time, or that there was any clear threat of related future criminal activity. At most, noted the court, GCI “alleged isolated events that are directed at one discrete goal: collecting a debt from GSL.” However, it determined that RICO does not extend to actions that will stop once a limited, discrete goal is met. Consequently, GSL’s RICO claims were dismissed for lack of continuity.

The case number is 14-2063-CM.

Attorneys: Andrew J. Pieper (Stoel Rives, LLP) for PTI Group, Inc. and Group Services Ltd. G. Edgar James (Polsinelli PC) for Gift Card Impressions, LLC.

Companies: PTI Group, Inc.; Group Services Ltd.; Gift Card Impressions, LLC

Cases: RICO KansasNews