RICO can’t be based on defamatory conduct

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Defamation allegations in a case involving an alleged scheme to defraud a company out of millions of dollars in student loan debt do not provide the requisite predicate for civil claims under the Racketeer Influenced and Corrupt Organizations Act. A tortious interference counterclaim failed to show intentional breach or termination of the agreements, and a Virginia business conspiracy counterclaim failed to allege a conspiracy between two or more people.

Background

Navient Solutions LLC generally alleges a scheme in which the defendants conspired to defraud Navient out of millions of dollars in outstanding student loan debt, and to manufacture federal lawsuits and arbitration claims against Navient for purported violations of the Telephone Consumer Protection Act. The second amended complaint added a new corporate defendant, GST Factoring Inc., which Navient alleges “operated as a factoring company to sweep and distribute proceeds from duped borrowers.”

GST has since filed three counterclaims against Navient, alleging tortious interference with contractual relations under Virginia law, civil RICO violations under 18 U.S.C. § 1962(c) and business conspiracy under Virginia Code § 18.2-499. Navient’s motion to dismiss those counterclaims is now before the court.

Tortious interference

Although GST’s counterclaim includes boilerplate language that Navient “knew and intended” that its actions would interfere with the factoring agreements, that language is directly contradicted by GST’s other allegations. Accordingly, GST has not properly alleged tortious interference with the attorney-client agreements.

Similarly, GST also has not properly alleged tortious interference with the factoring agreements because it has not alleged that any such agreements were ever breached or terminated. Because GST has failed to allege the intentional breach or termination of the agreements at issue, its tortious interference counterclaim will be dismissed.

RICO

Although the Fourth Circuit has not yet held as much, other courts have recognized that “it is firmly established that defamation and many other similar allegations do not provide the requisite predicate for RICO violations.” Accordingly, courts have frequently rejected RICO claims based on wire fraud allegations when those allegations are merely “an attempt to spin” a defamation claim into a RICO claim or are “at best [a] thinly­clothed” defamation claim.

Here, GST does not dispute that it is alleging defamatory conduct as the basis for its RICO counterclaim. Instead, GST argues that “established case law allows RICO claims premised on defamatory remarks.” However none of the cases which GST cites actually supports that assertion, and none calls into question the more recent, unequivocal statement to the contrary in Kimberlin v. Nat’l Bloggers Club, 2015 WL 1242763 (D. Md. Mar. 17, 2015). Because GST has failed to allege a pattern of racketeering activity, its RICO counterclaim will be dismissed.

Business conspiracy

GST alleges that Navient conspired either with its own employee Patrick Chaing or with “Does 1 through 10 (who are not employees or direct agents of Navient)” in carrying out the “Navient Disinformation Campaign.” Neither allegation is sufficient to state a business conspiracy claim.

First, GST’s few allegations regarding Chaing plainly concern his performance of services for Navient. Accordingly, even though GST has alleged that Chaing committed an international tort, it has not alleged that Chaing was acting outside the scope of his employment when he did so. Therefore, a conspiracy between Navient and Chaing is “a legal impossibility.”

Second, GST’s allegations regarding “Does 1 through 10” are particularly conclusory. Not only are these individuals not named, but GST’s counterclaim provides no identifying information about them whatsoever beyond the bare and suspect assertion that they are not Navient employees. This does not meet the heightened pleading requirements of Rule 9(b). Because GST has failed to allege the existence of a conspiracy between two or more people, its counterclaim for business conspiracy will be dismissed.

Plaintiff’s motion to dismiss counterclaims granted.

Navient Solutions LLC v. The Law Offices of Jeffrey Lohman, Case No. 19-cv-461, April 2, 2020. EDVA at Alexandria (Brinkema). VLW 020-3-201. 10 pp.