Antitrust Law Daily Wrap Up, RICO—E.D. Tex.: Information infrastructure companies may have improperly induced fact witnesses, (Feb 9, 2015)

By Greg Hammond, J.D.

A marketing consulting company raised issues of material fact in whether three information infrastructure companies violated the Racketeer Influenced and Corrupt Organizations Act (RICO) by pursuing a scheme of offering and providing improper inducements to fact witnesses in exchange for testimony. The federal district court in Sherman, Texas therefore denied the information infrastructure companies’ motion for summary judgment (Oasis Research, LLC v. Carbonite, Inc., February 5, 2015, Mazzant, A.).

Background. Plaintiff Oasis Research, LLC asserted counterclaims against defendants Carbonite, Inc., Decho Corp., and EMC Corp., alleging that the three companies violated RICO by (1) threatening, badgering, and coercing witnesses to testify; and (2) improperly compensating the witnesses $200,000 upfront and an additional $140,000 after litigation is completed, plus expenses and legal fees, in exchange for testimony. The three defendants moved for summary judgment on the RICO claims, arguing that there is no evidence that they comprise an enterprise, and that there is no pattern of activity that would amount to or pose a threat of continued criminal activity.

Predicate acts. The court first determined that there were issues of material fact with regard to whether the defendants offered or promised anything of value to the witnesses in exchange for their testimony. Under the totality of the circumstances, the court found that contact between the defendants and the witnesses and an agreement to compensate them $200,000 upfront and an additional $140,000 after litigation ended was sufficient to constitute a criminal predicate act. In addition, there were material fact issues concerning whether the defendants engaged in misleading conduct towards the witnesses to influence testimony, or whether the witnesses were intimidated or corruptly persuaded to influence their testimony. Consequently, the defendants’ motion for summary judgment based on a failure to allege two predicate criminal acts was denied.

Enterprise. The defendants also alleged that there was no evidence that they engaged in an “enterprise,” as required under RICO. The court disagreed, finding that the litigation is ongoing, and the defendants declared that they obtained the witnesses’ causes of action against Oasis for fraud and unjust enrichment. This, according to the court, demonstrated that the defendants could continue to pursue claims against Oasis. Consequently a fact issue remained as to whether the defendants constitute an enterprise, and the motion for summary judgment based on this requirement was denied.

Pattern of racketeering activity. Lastly, the defendants argued that there was no pattern of activity that could amount to or pose a threat of continued criminal activity. Once again, the court rejected the defendants’ argument, finding that Oasis demonstrated the acts were related to each other, because they have the same or similar purposes, results, participants, victims, or methods of commission, and the evidence indicates that the defendants can continue to pursue claims in this litigation or in future litigation. A fact issue regarding a pattern of activity sufficient to amount to a threat of continued criminal activity therefore existed, and the motion for summary judgment was denied.

The case number is 4:10-CV-00435.

Attorneys: Alan Kellman (Desmarais LLP) for Oasis Research, LLC. Aaron W. Moore (Foley & Lardner, LLP) for Carbonite, Inc. Alyssa Margaret Caridis (Orrick Herrington & Sutcliffe LLP) for EMC Corp. and Decho Corp.

Companies: Oasis Research, LLC; Carbonite, Inc. EMC Corp.; Decho Corp.

Cases: RICO TexasNews