Antitrust Law Daily Wrap Up, RICO—E.D. La.: Claims against shipping repair company for human trafficking proceed, (Jan 12, 2015)

By Dan Selcke, J.D.

The federal district court in New Orleans denied summary judgment of claims that Signal International, a shipping repair company, violated the Racketeer Influenced and Corrupt Organizations Act (RICO) by participating in a scheme to traffic Indian construction workers into the United States. The workers were allegedly promised a path to citizenship in return for paying high recruitment fees, but were instead forced to labor in isolated conditions without such a path ever materializing. Despite Signal’s arguments to the contrary, the RICO defendants identified in the complaint were distinguishable from the alleged RICO enterprises, none of the claims required that RICO be applied extraterritorially, and there were questions of fact regarding whether Signal had conspired to violate the RICO statute (David v. Signal International, LLC, January 9, 2015, Morgan, S.).

Person-entity distinction. Signal’s motion raised a couple of issues, beginning with whether the RICO persons identified in the complaint were sufficiently distinct from the alleged RICO enterprises. The complaint named several RICO persons as defendants. These included Signal itself, as well as several other companies allegedly responsible for recruiting the Indian laborers and transporting them overseas. It also alleged three different association-in-fact enterprises, each made up of different combinations of the defendants. This did not run afoul of the RICO statute, which required RICO defendants to be distinct from RICO enterprises. Under St. Paul Mercury Insurance Co. v. Williamson, 224 F.3d 425 (5th Cir. 2000), the person-entity distinction was violated when a single entity was named as both a RICO defendant and a RICO enterprise. Here, several entities were named as defendants and separately named as members of different associations-in-fact.

Extraterritorial application. Next, the court had to consider whether RICO applied extraterritorially, as much of the scheme involved in this case originated outside the U.S. The Fifth Circuit had never considered this question, but other circuits had. The Ninth Circuit focused on whether the pattern of racketeering activity at issue had a sufficient nexus to the U.S. Under this standard, schemes conceived of and planned overseas could apply stateside if they were executed and perpetuated there. The Second Circuit, meanwhile, allowed RICO claims with extraterritorial aspects to proceed if Congress intended the underlying predicate statute to apply extraterritorially. If there was no such intent, the claims could still proceed if the plaintiffs alleged conduct that satisfied every essential element of the predicate statute.

The RICO claims in this case succeeded under either test. The complaint alleged a pattern of racketeering activity with enough domestic dimensions to survive the Ninth Circuit test, and passed the Second Circuit test by alleging violations of the essential elements of the underlying predicate statute.

RICO claim survives. Finally, the court held—without much discussion—that the complaint alleged enough evidence to create material questions of fact regarding whether two or more of the defendants agreed to commit a substantive RICO offense and whether Signal knew of and agreed to the overall objective of that offense. Accordingly, the court denied the company’s motion for partial summary judgment.

The case number is: No. 08-1220

Attorneys: Alan Bruce Howard (Crowell & Moring, LLP) for Kurian David. Erin Casey Hangartner (Hangartner, Rydberg, Terrell & Hart, LLC) for Signal International LLC. Daniel Edwin Buras, Jr. (Buras Law Firm) for Gulf Coast Immigration Law Center, LLC. Law Offices of Malvern C. Burnett, APC. J & M Associates, Inc., pro se. Global Resources, Inc., pro se.

Companies: Signal International LLC; Gulf Coast Immigration Law Center, LLC; Law Offices of Malvern C. Burnett, APC; J & M Associates, Inc.; Global Resources, Inc.

Cases: RICO LouisianaNews