02/01/2006
CONTACT: Melissa Sharp, (202) 554-9000
WASHINGTON, D.C. — The Civil Racketeer Influenced and Corrupt Organizations law has found a new victim − small-business owners. The RICO statute, which was originally intended to deter mobsters, racketeering and organized crime, is now being used against small businesses and other organizations as a means to bring claims typically limited to state courts into the federal court system, where a plaintiff can recover treble damages and attorney’s costs.
In a case now before the U.S. Supreme Court, the National Federation of Independent Business’ Legal Foundation filed an amicus brief yesterday, urging the court to end this misuse of the civil RICO statute by establishing a clear definition of what does and does not qualify as an “enterprise” for RICO purposes.
“This Court should use the occasion of this case to halt the lower courts’ misguided expansion of the RICO ‘enterprise’ definition,” said Karen Harned, executive director of NFIB’s Legal Foundation. “Stretching this definition, as the lower courts have done, not only goes against the original intent of the statute, but also provides aggressive lawyers with an avenue to abuse the RICO statute to collect lucrative damages and attorney’s fees.”
Small businesses are extremely vulnerable to these types of abuses because they often can’t afford to hire an attorney and pay legal fees associated with defending themselves against these claims. Additionally, the stigma associated with RICO, a charge historically linked to mobsters, racketeering and organized crime, can be devastating for a small business.
NFIB argues that a business that uses contractors to perform a specific business function does not qualify as an “enterprise.” Accordingly a holding adopting that a business and a contractor do constitute a RICO “enterprise” would dramatically increase potential exposure to civil RICO liability.
“The lower courts' expanded definition of an ‘enterprise’ improperly threatens a business with treble damages based solely on the use of contractors, a common business practice that is critical to the efficiency of the nation’s economy. Allowing this definition to stand will make all corporations that use contractors vulnerable to RICO claims,” said Harned.
The case before the court is Mohawk Industries v. Shirley Williams et al., No. 05-465. Mohawk Industries contracted an employment agency to hire employees for their business and was then charged with acting as an “enterprise” with the employment agency in violation of the RICO statute.
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The NFIB Legal Foundation is a 501(c)(3) organization created to protect the rights of America's small-business owners by providing advisory material on legal issues and by ensuring that the voice of small business is heard in the nation's courts. The National Federation of Independent Business (NFIB) represents the consensus views of its 600,000 members in Washington and all 50 state capitals.
