Lawyers and RICO Liability: Challenging the Legal Services Defense

Under the Racketeer Influenced and Corrupt Organizations Act (RICO), certain individuals and entities engaged in organized criminal activities may be held civilly or criminally liable for their actions. However, lawyers have traditionally enjoyed a legal services defense that exempts them from RICO liability. This defense, which has been in place for the past three decades, shields lawyers from RICO charges even if their clients engage in illegal activities with the lawyer’s legal advice.

The Legal Services Defense and its Limitations

The legal services defense, which has been a cornerstone of lawyers’ RICO immunity, limits RICO liability to those individuals directly responsible for the “operation and management” of an enterprise. In practice, this means that lawyers advising on racketeering schemes generally remain insulated from RICO liability, as long as they are not directly involved in the enterprise’s management or operation.

However, a recent lawsuit filed in the United States District Court for the Northern District of Illinois challenges this long-standing defense. The lawsuit alleges that a national plaintiffs’ asbestos firm and its employees engaged in “operation and management” conduct that violated the RICO statute. Specifically, the firm is accused of coaching clients to only describe products linked to solvent defendants in an effort to maximize their recovery, and thereby increasing the firm’s profits. Unlike previous RICO charges against lawyers, this suit alleges that the lawyers themselves engaged in racketeering activity and thus fall outside the scope of the legal services defense.

Implications for Lawyers and Pattern Litigation

The implications of this lawsuit for lawyers representing clients in pattern litigation or mass tort litigation could be significant. Asbestos litigation, in particular, has historically relied on identifying the most solvent defendants and any potential exposure to their asbestos-containing products. The more detailed and accurate the plaintiff’s descriptions of product exposure, the higher the settlement value tends to be. This lawsuit alleges that plaintiffs’ law firms have an incentive to assist clients in identifying solvent defendants to maximize their own profits by coaching clients to avoid including exposures to bankrupt defendants and instead inflating claims to those against solvent, named defendants.

In addition to exposing attorneys and their clients to potential RICO liability, the pending lawsuit could also significantly impact attorney-client privilege and work-product doctrine protections. The discovery process involved in RICO litigation is often expansive and invasive and could potentially delve into sensitive and confidential communication between lawyers and their clients.

The Future of RICO Liability for Lawyers and Law Firms

The outcome of the pending lawsuit in the Northern District of Illinois could set legal precedent regarding the legal services defense and its limitations. Lawyers would be wise to monitor the case as it progresses and consider the potential implications for their own practice areas and clients.

While the legal services defense has been in place for several decades and has offered lawyers considerable protection from RICO liability, this latest lawsuit alleges that lawyers themselves may be engaged in racketeering activities that violate the RICO statute. As with any litigation, the outcome remains uncertain, but this case could signal a significant shift in the legal landscape regarding RICO liability for lawyers and law firms.

Originally Post From https://natlawreview.com/article/rico-not-just-mob-lawyers

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