Antitrust Law Daily Wrap Up, RICO—S.D. W.V.: Private equitable relief not available under RICO, (Jul 21, 2015)

By Michael Menzhuber, J.D., LL.M.

A beer and wine distributor’s complaint, alleging that a competing distributor sent fraudulent emails to the distributor’s customers and seeking equitable relief, was dismissed as moot. The federal district court in Charleston, West Virginia determined that it lacked subject jurisdiction over the matter because the Racketeering Influenced and Corrupt Organizations Act (RICO) did not expressly or implicitly create a private right of action for equitable relief (Galaxy Distributing of West Virginia, Inc. v. Standard Distributing, Inc., July 16, 2015, Goodwin, J.).

Background. Galaxy Distribution of West Virginia, Inc, a West Virginia beer and wine distributorship, learned that two emails, sent to two of its customers, were purportedly signed by Galaxy’s licensed representative, Shawn Rucker.

After Galaxy began investigating the source of the emails, it determined the Internet Service Provider (ISP) for the IP address, where the logins to the account originated, and the domain named assigned to the IP address. Galaxy issued a subpoena duces tectum to the ISP to obtain information related to the IP address and domain name. The ISP informed Galaxy that the information could not be provided without a court order. Before Galaxy could file a motion for a court order, Standard Distributing, Inc. (Standard), a competing beer and wine distributorship, filed a motion to quash the subpoena and a motion to intervene.

Galaxy then filed a complaint, alleging that Standard’s conduct in sending the fraudulent emails constituted criminal fraud, criminal identify theft, criminal wire fraud, and a civil RICO violation. Galaxy’s complaint sought a preliminary and permanent injunction requiring Standard to stop all fraudulent activity. The complaint did not, however, seek relief in the form of monetary damages.

RICO. The court acknowledged that there is split of authority on the whether RICO authorizes private parties to seek injunctive relief. Nevertheless, it concluded that RICO cannot be used as vehicle for a private cause of action in equity. The court’s conclusion that equitable relief is not available under RICO aligned with the holding in the Ninth Circuit’s Religious Tech. Ctr. v. Wollersheim, 796 F.2d 1076 (1986). In that case, the Ninth Circuit found that RICO did not provide equitable relief because: (1) RICO’s legislative history showed that Congress rejected the provision of injunctive relief; (2) there were similarities between RICO and the treble damages provision of the Clayton Act, which the Supreme Court has held precludes private injunctive relief; and (3) civil RICO has been expanded to be inconsistent with the Supreme Court doctrine on the limitations of implying causes of action or remedies not expressly stated by statute.

The case is No. 2:15-cv-04273.

Attorneys: Bradley J. Schmalzer (Flaherty Sensabaugh & Bonasso) for Galaxy Distributing of West Virginia, Inc. W. Jesse Forbes (Forbes Law Offices) for Standard Distributing, Inc.

Companies: Galaxy Distributing of West Virginia, Inc.; Standard Distributing, Inc.

Cases: RICO WestVirginiaNews