Last week, in the course of discussing a vaccine case, we mused over the misuse of the due process clause of the fourteenth amendment. Just for a moment we were back at U. of Chicago Law (and, as Dan Fogelberg sang, “felt that old familiar pain”). In 1984, our waist and forehead seemed smaller and our noggin seemed larger, full of Big Thoughts on how the Law Should Be. What we believed then, and still believe, is that “process” should mean, you know, process. But that term has been stretched well beyond its literal meaning because SCOTUS eviscerated the privileges and immunities clause in the Slaughterhouse cases.
The same thing happened with equal protection, a concept meaning that states would protect crime victims by prosecuting criminals, no matter the race of the criminal or victim. (This view belongs to the author of this particular post and no other member of the Blog. We have been told that we are impossibly retrograde.) As a result of the High Court’s terpsichorean stumble, we the people got rights based on a structure of due process, equal protection, and “penumbras, formed by emanations” — and we learned recently how rickety that structure was.
It was not inevitable that the mistaken curtailment of privileges and immunities would lead to the expansion of due process and equal protection. But once one mistake was printed in the U.S. reporter, instead of fixing the first mistake, which would have required overturning a bad precedent, SCOTUS made more mistakes. (We saw one legal scholar’s estimate that SCOTUS has reversed itself in approximately 0.5% of its decisions.)
Sometimes courts are brave enough to undo errors (e.g., reversing Plessy), but more often they don’t. Korematsu has not been reversed. Neither has Buck v. Bell. To be sure, the fact scenarios inspiring those cases have not cropped up again, and maybe they won’t. But you cannot say that about Citizens United or Heller, and we are probably stuck with them for a bad long while. The participants in the justice system spend a lot of time pretending that prior court decisions are correct, even when they are manifestly absurd. Mind you, that’s a feature, not a bug, of the law.
One of the courses we took our first year in law school was Elements of the Law, taught by the great Edward Levi. The Elements class covered jurisprudence. It was more philosophical than, say, secured transactions or commercial paper. We got a big dose of Bentham, Dworkin, and several cases with a plaintiff named Regina. There was a lot of legal history packed into the course, and there were a lot of mistakes packed into that history. Take a look at the case law on juries, obscenity, or, so help us, tomatoes. Good luck finding a logical through-line.
As interesting as it is to examine why courts made certain mistakes, it is just as interesting to examine why some mistakes get corrected and others do not. And here’s one of the more interesting theories we learned from Professor Levi: when a court mucks up statutory interpretation, that is an especially hard error to fix. Perhaps courts think that if they really misinterpreted a statute, the legislature would amend the statute. Failure to amend the statute means the court got it right, right?
Wrong. There are all sorts of reasons why legislatures don’t race in to fine tune legislation. Have you heard of legislative paralysis? Have you been awake at all over the past two weeks of low comedy in the House of Representatives? Are you a sentient being?
All of which brings us to the Frankenstein monster known as civil RICO. (Bexis proposed this musical link. We also offer this cinematic one.) As you no doubt know, that R in RICO stands for racketeering. The Racketeering Influenced and Corrupt Organizations (RICO) was passed in 1970. It was originally intended to assist in the prosecution of mafia leaders, as it permitted them to be tried for crimes they ordered others to do rather than committed themselves. It had a criminal component (that’s the one that always had Tony and Uncle Junior fretting in The Sopranos) and, unfortunately, a civil component. That’s the one that has led to an avalanche of abuse. Instead of being used against truly nefarious enterprises, civil RICO became an all too often add-on to ordinary tort cases.
We once met the author of the RICO law, G. Robert Blakey, a professor at Notre Dame Law School. Blakey has had a remarkable and distinguished career. Among other things, he was an investigator of the JFK assassination. But if you ran into Blakey at a conference, he was almost certainly there to talk about RICO. And perhaps we are biased, because we were among the many defense hacks in the audience stewing over RICO’s promiscuity, but it seemed to us that Blakey was delighted that his legislative creation had become so ubiquitous. Let’s face it, if some governmental body was silly enough to pass a law we wrote, we’d probably want to see it everywhere, too.
Too many courts smiled upon civil RICO’s application to all sorts of ordinary business disputes where it was not intended. A RICO count upped the stakes, upped the expense, and upped the temperature. News flash: business people do not enjoy being called racketeers. A RICO claim almost demands scorched earth litigation. But once enough courts endorsed (that is, failed to dismiss) civil RICO causes of action, some plaintiff lawyers seemed to think that including a RICO claim was de rigueur.
The expansion of civil RICO was a mistake. But, as Professor Levi taught us, that was a mistake not easily rectified. Thus, the best defendants can hope for is that courts will test civil RICO pleadings with rigor. Thankfully, that happens occasionally, as it did in MSP Recovery Claims, Series Inc. v. Avanir Pharmaceuticals Inc., 2022 WL 17220647(C.D. Cal. Oct. 20, 2022). The plaintiff was the assignee of claims arising from the payments of prescription drugs on behalf of several Medicare beneficiaries. If the shark in Jaws was the perfect eating machine, the plaintiff in MSP appears to be the perfect litigating machine. It claimed that the defendant promoted a drug for off label uses, causing the drug to be placed on formularies, and causing lots of allegedly improper Medicare payments. The plaintiff’s complaint contained causes of action for unjust enrichment, fraud, conspiracy to commit fraud and, inevitably, violations of civil RICO.
The defendant filed a motion to dismiss. The first defense argument, lack of standing, worked for some of the assigned claims, but not others. The second argument, statute of limitations, raised issues of timeliness that the court believed required factual development. But the defendant fared better with its arguments against unjust enrichment and common law fraud. The former failed because unjust enrichment makes sense only if monetary damages would be an inadequate remedy, and there was no hint of that here. The fraud claim failed because the plaintiff had failed to plead any misrepresentation. Off label promotion is not necessarily false in any way.
That last point is of more than a little interest to us. Liability — criminal, civil, or regulatory — for truthful statements about off-label use has serious first amendment issues that we have blogged about here repeatedly (here, for instance). The government, having been bitten in the Caronia and Amarin cases, is now careful to allege falsity. Private plaintiffs, as this case indicates, not so much. Thus, if progress is going to be made on the first amendment front, it is more likely to be in the “private AG” cases such as this one.
And that brings us to the RICO claim. To establish liability under 18 U.S.C. Section 1962(c), a plaintiff must prove that the defendant (1) conducted or participated in the conduct of (2) an enterprise (3) through a pattern (4) of racketeering activity (5) causing injury to the plaintiff’s business or property. While the RICO enterprise “is an entity separate and apart from the pattern of activity in which it is engaged,” “an associated-in-fact enterprise under RICO does not require any particular organizational structure, separate or otherwise” and need not have an ascertainable “structure beyond that necessary to carry out its racketeering activities.” Got that? What a mess.
But the court in MSP sorted out the mess and held that the defendant failed to plead RICO predicate acts of mail or wire fraud, as it did not identify any false or misleading statements by the defendant. The plaintiff generally alleged “deceptive off-label promotion” via kickbacks. But kickbacks, by themselves, are not RICO violations, and the plaintiff could not point to any statement that was actually false. Fraud must be pled with particularity. Here there was not only no particularity, there was no fraud at all. The plaintiff offered no facts tending to show that the defendant misrepresented the drug’s risks for the off-label use.
We will be the millionth lawyer writing about RICO to quote the final words of the main character in Little Caesar (the 1931 gangster movie, not the pizza place). In fact, there are prior examples on this selfsame blog. A mortally wounded Edward G. Robinson whimpers, “Mother of Mercy, is this the end of Rico?” Alas, we have not seen the end of civil RICO, but at least it was shot down in this case.