Tuesday, June 10, 2008
The Supreme Court ruled in Bridge et al. v. Phoenix Bond & Indemnity Co. et. al., on the role of reliance when RICO is premised on a predicate act of mail fraud (see here). The Court's opinion is not surprising. Here are some thoughts -
- Since its passage in 1970, the Court has been reluctant to restrict the reach of the RICO Act. And although the statute has long left its initial roots as a tool to combat organized crime to become a statute that is regularly used by both prosecutors and civil litigants in common cases of fraud, the Court has reigned it in.
- Even when interstate commerce was restricted in Lopez, the Court came back in the Robertson decision and held that RICO had an alternative way of proceeding - either "engaged in" or "substantially affect" interstate commence.
- The two key cases that restricted RICO, H.J. Inc. v. Northwestern Bell Telephone Co. and Reves v. Earnst & Young, both were interpreting the statutory language.
- The Court has ruled in several cases to restrict the constantly expanding mail fraud statute. Mail fraud is a commonly used predicate offense in RICO.
- Although the Court often refers to common law concepts when discussing fraud statutes, it won't help the party being subjected to a RICO claim as the Court firmly notes that "Congress chose to make mail fraud, not common-law fraud, the predicate act for a RICO violation."
- The Court sends a clear message to Congress that if you don't like this decision, then its up to you to correct it. And Congress may want to consider this challenge as this decision opens the door to increased civil litigation using RICO.