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4th Circuit: No private right to injunctive relief under RICO

The Racketeer Influenced and Corrupt Organizations Act doesn’t give private plaintiffs a right to sue for injunctive relief, the 4th U.S. Circuit Court of Appeals has unanimously ruled in an issue of first impression.

The decision deepens a split among the circuits, which may ultimately require resolution from the U.S. Supreme Court.

The 57-page opinion is Hengle v. Treppa (VLW No. 021-2-309). 

In this case, a group of Virginia consumers who defaulted on short-term, high-interest loans issued by online lenders affiliated with the Habematolel Pomo of Upper Lake, a federally recognized Native American tribe in northern California, brought a putative class action against tribal officials, alleging that the loans violated Virginia and federal law.

U.S. District Judge David Novak denied the tribal officials’ motions to compel arbitration and to dismiss the suit on the grounds of tribal sovereignty and choice-of-law provisions.

Novak did, however, dismiss the RICO Act claims brought against the officials, finding that the statute didn’t authorize private plaintiffs to sue for injunctive relief.

In a Nov. 16 opinion written by Allison Jones Rushing, the 4th Circuit affirmed each of these rulings.

The other circuits that have considered the RICO question had been evenly split, with the 2nd and 7th Circuits holding that equitable relief is available to private plaintiffs and the 5th and 9th Circuits finding to the opposite.

Rushing noted that the RICO Act, also known as Section 1964, empowers U.S. District Courts to employ a wide range of equitable remedies to prevent violations of its substantive provisions. The subsection that authorizes the Attorney General to institute proceedings under this statute references these remedial powers, but — crucially, in Rushing’s reading of the statute — the subsection allowing private litigants to sue for monetary relief under the statute makes no such mention of injunctive or declaratory relief.

“By authorizing the government to ‘institute proceedings under’ Section 1964 and not giving private plaintiffs the same authority, Congress expressed its intent to withhold from private plaintiffs the ability to invoke the injunctive power granted to the courts in Section 1964(a),” Rushing wrote.

“Of course, that subsection also does not expressly limit private plaintiffs to the treble damages and costs authorized there. But Congress’s use of significantly different language to create the governmental right of action in Section 1964(b) and the private right of action in Section 1964(c) compels us to conclude by negative implication that, although the government may sue for prospective relief, private plaintiffs may sue only for treble damages and costs.”

Rushing rejected the plaintiffs’ invitation to draw an analogy between the RICO Act and the Clayton Act, a federal antitrust statute upon which the RICO Act was modeled. The U.S. Supreme Court regularly treats the remedial sections of the two statutes identically, regardless of “superficial differences” in language.

But Rushing said that, in this instance, the differences between the two statutes were far from superficial, since the Clayton Act explicitly provides that private parties “shall be entitled to sue for and have injunctive relief” against loss or damage threatened by a violation of the antitrust laws, a provision that has no analogue in the RICO Act. The analogy thus weakened the plaintiffs’ argument rather than strengthened it, the court concluded.

“That Congress provided private antitrust plaintiffs a separate right to prospective injunctive relief under a materially similar remedial structure confirms that RICO, by lacking that separate provision, also lacks the separate right,” Rushing wrote.

Rakesh Kilaru of Wilkinson Stekloff in Washington, D.C., and Matthew E. Price of Jenner & Block in Washington, D.C., represented the tribal officials. Matt Wessler of Gupta Wessler in Washington, D.C., represented the borrowers. None of the attorneys responded to calls seeking comment on the court’s ruling.