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Posts Tagged ‘RICO’

Open Government, Retaliation and Redress: Case Study from Florida

Posted on: December 6th, 2019

By: Michael Kouskoutis

Florida is well known for its robust public records law, where, upon receipt of a public records request, custodians of public records are required to promptly acknowledge the request, then permit the requested records to be inspected within a reasonable time. Unfortunately for custodians, Florida law does not define “reasonable time,” and awards attorney’s fees for unjustified delays or failures to respond. The 11th Circuit recently examined an interesting case involving a local government’s effort to protect itself against a devious scheme created to take advantage of these open government laws.

In DeMartini v. Town of Gulf Stream, et al., a not-for-profit corporation worked with a law firm to issue nearly 2,000 deliberately vague public records requests to a small Florida town, and then, when the town didn’t promptly or adequately respond, filed or threatened to file lawsuits against the town, demanding attorney’s fees and costs. The town, hemorrhaging attorney’s fees in defending against this scheme, decided to file a RICO action against the corporation. The RICO action made its way up to the 11th Circuit, where the Court, while troubled by the corporation’s scheme, denied the town’s motion for summary judgment on the basis that threatening to file litigation against a government could not trigger liability under RICO.

Soon after, the corporation’s director filed a § 1983 claim against the town, alleging that the town unlawfully retaliated against her when it filed the RICO suit to stop the records requests. In particular, the director argued that filing public records requests is a form of constitutionally protected speech. The trial court granted the town’s motion for summary judgment on the § 1983 claim, which after appeal, also made it to the Eleventh Circuit.

The Eleventh Circuit recently affirmed the grant of summary judgment. The Court reiterated that requesting public records and seeking redress from government is an activity protected by the First Amendment, but that because the town had probable cause to initiate the civil RICO case, the director’s § 1983 claim failed. The Court recognized that the town “had a legitimate interest and motivation in protecting itself, its coffers, and its taxpaying citizens.”

Robust open government laws maybe vulnerable to abuse, but as DeMartini illustrates, courts recognize a government’s ability to protect itself.

If you have any questions or would like more information, please contact Michael Kouskoutis at [email protected].

Who is Protected by Privilege?

Posted on: December 27th, 2018

By: Matthew Jones

In the recent case of Day v. Johns Hopkins Health Sys. Corp., the U.S. Court of Appeals for the Fourth Circuit answered this question in the context of expert witnesses facing RICO violations. In the Day case, an expert witness testified that the evidence he reviewed regarding the coal miners’ claim for Black Lung Benefits Act benefits did not support those claims. After the claim was denied, the Center for Public Integrity alleged that the radiology unit at Johns Hopkins were much less likely to find cases of black lung disease than other doctors.

On appeal, it was argued that the expert witness misled the Court and the miners as to the standards he was applying, which amounted to a systematic violation of international standards. However, the Fourth Circuit reiterated the “absolute” nature of the litigation privilege for those witnesses who “aid the truth-seeking mission of the judicial system.” One important goal of this privilege is to prevent future witness participation deterrence or to be undermined by subsequent actions for damages arising out of the witness’s testimony.

If you have any questions or would like more information, please contact Matthew Jones at [email protected].

It’s A Business Not A Criminal Enterprise (Any Longer)

Posted on: December 17th, 2018

By: David Molinari

The operation of a commercial cannabis business presents a host of unique issues. Security is a concern when the business stores hundreds of thousands of dollars in “inventory” on site. Banking regulations present another problem requiring these enterprises to be a cash-based business; a requirement brought on by federal forfeiture laws if revenues are deposited into any federal banking institution insured by the Federal Deposit Insurance Corporation. Another aspect of operating a cannabis business: the smell. While state legislatures wrestle with how to balance the exercise of police powers with accepting tax revenues generated by a multi-billion-dollar industry, the day to day practical operation forces business and land owners to live and work next to one another; and where the relationship breaks down, neighboring business owners  turn to the courts.

For the cannabis industry, local regulations authorizing permits for operation are developed utilizing combinations of zoning and land use restrictions that have the potential, once a permit is issued, to provide some level of protection against neighboring business owners trying to impose common law remedies such as nuisance or trespass to control greater influx of traffic, odor and diminished land value.  Suits for nuisance or trespass may not allow a disgruntled neighboring land owner relief. The perceived lack of state remedies forces neighboring owners to try alternative jurisdiction and relief theories. In one instance, a neighboring commercial land owner decided to file a federal racketeering, influence and corrupt organization (RICO) civil suit seeking to close down the neighboring commercial cannabis business.

Although various states have enacted legislation legalizing medicinal and recreational cannabis, the fact remains that cannabis is a controlled federal substance, the possession or sale of which constitutes a federal crime.

Hope and Michael R. owned a neighboring commercial tract to Parker W’s cannabis cultivation business. The Hope and Michael claimed that Parker’s cannabis business inundated their neighboring property with the scent of cannabis as well as incessant noise from air conditioners.

Rather than attempting to enforce common law nuisance or trespass theories of relief, Hope and Michael filed a lawsuit based upon federal law and particularly that the product sold and cultivated is illegal under Federal Law; and such illegality had negative effects on the value of other neighboring parcels in the business park. They claimed the presence of the cannabis facility itself dropped the value of the land.

The case made it to trial where Parker argued that the business was legally zoned, housed in a business park that was commercial and agricultural. Other businesses in the park included an animal feed lot. Any scent or odor of cannabis was no different than the smell from an animal feed lot or a nearby landfill. The business itself was legal under state zoning and land use laws.

A federal jury rejected the claim that operation of a cannabis-based business in violation of federal law is inherently racketeering. As to the question of whether the operation of the cannabis business caused damage to neighboring land, the expert opinions presented by the parties actually showed the cannabis business resulted in an increase in the business park land values. One could argue under the Doctrine of Implied Findings, the jury found the smell of pot is preferable to animal feed or a landfill.

The cannabis industry, medicinal or recreational, may enjoy acceptance in a growing number of state legislatures. However, such acceptance in the legislature may not filter down to business to business levels. The economic impact of cannabis, including the influx of sales taxes to local economies as may negate the “stench” of marijuana in the halls of state senate and house chambers; but not to the neighboring small business owners that believe such an industry is only a business in which criminals or cartels profit. Neighboring business owners may not care about broader economic impact of sales taxes and look only to shelter their local investment in their business. The relationship among various commercial activities, be it manufacturing, technology or cannabis is an evolving process. The relationship among business owners will have its ups and downs and the cannabis industry will be subject to every variation of challenge at the local business to business level. Cannabis may be here to stay because of its commercial and economic impact being too great to ignore or confine. In the west, we now have emerging precedent that it is not a racketeering or corrupt business.

If you have any questions or would like more information, please contact David Molinari at [email protected].

When Appealing to the Environmentally-Friendly Consumer Results in RICO Litigation

Posted on: April 6th, 2018

By: Justine A. Baakman

With the push toward production of environmentally friendly motor vehicles driven primarily by consumer demand, vehicle manufacturers have been forced to rapidly adapt vehicle design and marketing strategies.  Appeals to the environmentally conscious consumer often involve touts of vehicle emissions test results with the goal of elevating one’s vehicle above the competition through achieving a lower result than any vehicle on the market.  The necessity to meet consumer demand in this respect has left vehicle manufactures open to suit by consumers unsatisfied with the emissions performance of their vehicles as compared to those advertised by vehicle manufactures.

BMW North America is the latest vehicle manufacturer facing such litigation.  In a class action federal suit filed by consumers residing in Pennsylvania, Maryland, and Colorado, BMW faces allegations of fraud, misrepresentation, and violation of consumer protection and unfair trade practices laws in relation to its emissions test results advertising of its 2009-2013 X5 xDrive 35d models and its 2009-2011 330d models.  BMW faces allegations that the subject models emit significantly higher levels than those advertised to consumers.

BMW has also been accused of violating the Racketeer Influenced and Corrupt Organizations Act (RICO) arising from allegations that it installed emissions cheat devices on the models at issue to render lower emissions test results, and in turn, appeal and attract environmentally conscious consumers to its vehicles.  Additional allegations include that the models at issue emit emissions at 27 times higher than the maximum level allowed by the Environmental Protection Agency, and that BMW colluded with a vehicle parts maker to attain the results advertised to consumers.

For further information or for further inquiries involving commercial liability, you may contact Justine Baakman of Freeman Mathis & Gary, LLP, at [email protected].