Antitrust Law Daily Wrap Up, RICO—NDIll: Terminated Employee of Oil Giant Could Not Maintain RICO Claim, (Oct 25, 2012)

By E. Darius Sturmer, J.D.

A lawsuit by a former employee within the corporate family of oil and gas industry giant BP, P.L.C.—alleging that the company, a corporate executive, and various affiliated entities violated federal RICO law through a scheme designed to “wrest control” of a particular subsidiary entity from a consortium of Russian businessmen that owned its other half—was dismissed by the federal district court in Chicago (Borich v. BP, P.L.C., October 23, 2012, Marovich, G.) for lack of standing and failure to state a claim.

The former employee alleged that after several years working for a BP affiliate she was offered, and accepted, a position to apply “Western-style” business strategies for building a sales and distribution network at a Kiev, Ukraine-based entity called TNK-BP that was jointly owned by BP and Russian consortium Alfa-Access-Renova (AAR). According to the former employee, the assignment involved circumventing the entity’s existing business practices—which were based upon personal relationships, unwritten rules and agreements, illegal payments or protection schemes, and other activities considered illegal in the United States and elsewhere—in order to implement the new business strategy. However, she claimed, the defendants not only knew that this initiative was doomed to failure, but had undertaken it specifically to depress the entity’s market capitalization to the point that they could buy out AAR’s interest in it at a drastically reduced price. As part of this scheme, she added, the defendants had actively participated in illegal payments or bribes, or were fully aware that these illegal payments were being made.

Extraterritorial Application

An initial argument by the defendants that the claim had to be dismissed because RICO did not apply extraterritorially was unavailing and therefore did not form a basis for dismissal, the court held. The former employee was not seeking an extraterritorial application of RICO, in the court’s view. Rather, she was a domestic plaintiff alleging injury from a domestic pattern of racketeering activity. As such, the court was limited to consideration of whether she had stated a domestic pattern of racketeering activity.

Pattern of Racketeering Activity

The former employee failed to allege a pattern of racketeering activity with the specificity required by Federal Rule of Civil Procedure 9(b), the court decided. Her general allegations of mail or wire fraud were insufficient. Two uses of the mail or wires that were alleged with greater specificity—a letter that the defendants sent her describing her position in Kiev and an email from a specific business associate—did not satisfy the “two predicate acts” requirement for establishing a pattern of racketeering activity. While the letter that the plaintiff claimed amounted to fraudulent recruitment—a copy of which was attached to the complaint—was adequately described, the former employee offered no details as to the contents of the email or how it related to a fraudulent scheme.

Standing to Sue

In addition, the former employee lacked standing to sue under RICO, the court said. The only injury that could be deciphered from the plaintiff’s complaint was the termination of her employment. However, this injury did not result from any of the predicate acts the plaintiff alleged, the court observed. While allegations of retaliatory termination might have had an impact on analysis of whether the former employee had standing, the court noted, she made no allegations of such a predicate act and it was not clear that she could have.

The case is No. 12 C 2367.

Joseph L. Kish (Synergy Law Group L.L.C.) for Lillian Borich. Daryl A. Libow (Sullivan & Cromwell LLP) and Thomas James Piskorski (Seyfarth Shaw LLP) for BP, P.L.C.

Cases: RICO IllinoisNews