Eleventh Circuit Opens the Door to Potential Civil RICO Lawsuits Based on Extortionate Litigation Activity

Demartino v. Town of Gulf Stream, __ F.3d __, 2019 WL 6207952 (11th Cir. Nov. 21, 2019)

The court affirmed the Defendant’s (Town of Gulfstream) motions for summary judgment finding that there was a probable cause for the Town to file a civil RICO lawsuit, even though the Court in a prior proceeding affirmed the dismissal of the civil RICO action, carving out an exception to the general rule.

Earlier Lawsuit

In year 2015, the Town alleged that plaintiff DeMartini and co-defendant O’Boyle and others “pummeled the town with nearly 2,000 public records requests, many of them frivolous, with no intention of actually reviewing the results.” Id. The Town also alleged that, if the Town failed to timely respond then the O’Boyle Law Firm would sue the Town, allegedly “engag[ing] in a pattern of frivolous litigation activity.” Id. at 441, 444. The O’Boyle Law Firm was formed by O’Boyle’s son, funded by O’Boyle, and was in the same building as O’Boyle’s real estate company. Thus, the Town and a contractor (Wantman) filed a civil suit against DeMartini, and others, alleging violations of RICO, 18 U.S.C. §§ 1962(c).

Upon motion to dismiss by the defendants, the federal district court dismissed the Town and Wantman’s class action RICO complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The district court concluded that the defendants’ filing lawsuits, or even threatening to sue, did not constitute a predicate act under RICO. In so ruling, the district court relied on Eleventh Circuit precedent in Raney v. Allstate Ins. Co., 370 F.3d 1086, 1087–88 (11th Cir. 2004) (holding that the filing of a lawsuit did not state a claim for extortion as a predicate act under RICO), and United States v. Pendergraft, 297 F.3d 1198, 1207 (11th Cir. 2002) (holding that neither the threat to litigate nor the fabrication of evidence behind the threat of a lawsuit made the action “wrongful” within the meaning of the Hobbs Act, and, thus, could not be a predicate act under RICO).

The Court in its earlier decision, 654 Fed. Appx. 439 (11th Cir., June 21, 2016) found the conduct of Demartino “troubling,” but still affirmed given the precedent in the circuit.

Current Proceeding

 

In this proceeding, DeMartini filed the instant § 1983 action against the Town and Wantman arguing the RICO lawsuit constituted unlawful retaliation against her. As to her § 1983 First Amendment retaliation claim, DeMartini alleged that the speakers at the Town’s October 2014 Commission meeting made clear that the Town was not concerned with the merits of its RICO lawsuit or its likelihood of success and thus the Town lacked probable cause to initiate its civil RICO lawsuit against DeMartini. DeMartini contended that the Town’s RICO action was “baseless” and frivolous given Eleventh Circuit precedent that a threat to file a civil lawsuit is not a valid RICO predicate even if the plaintiff was using the litigation for extortionate purposes.

 

The Court found that prior to filing its RICO action, the Town obtained substantial information that supported a reasonable belief that DeMartini and others had committed fraud through their participation in an extortionate scheme involving fraudulent public records requests, false settlement demands, and subsequent multiple lawsuits designed to obtain attorney’s fees as opposed to the requested records known as a “windfall scheme.” The scheme involved two steps: (1) pummeling the Town with voluminous and intentionally vague public records requests that were designed to elicit either no response, an incomplete response, or an untimely response, and then (2) demanding that the Town pay an excessive settlement to avoid litigation under Florida’s public records law, including demanding attorney’s fees in excess of the fees and costs the O’Boyle Law Firm actually incurred to settle the case.

 

This Court did reiterate precedent in Pendergraft and Raney precluded the Town’s theory that a RICO action could be based on DeMartini’s litigation activity, and thus eliminated any probable cause it may have had for asserting a RICO claim. But, the court rejected DeMartini’s argument. Pendergraft and Raney made it unlikely, but not impossible, for the Town to succeed. The Town had a reasonable belief that there was a legitimate and material distinction between their RICO claim and the ones that came before it in that O’Boyle, DeMartini, and others had abused their statutory right to request public documents from the government “on a grand scale.” Given the huge number of requests and the obvious pattern that they were being filed to strip the Town of money while allowing the O’Boyle Law Firm to profit handsomely, it was not unreasonable for the Town to believe in good faith that this Court might carve out an exception to the general rule.

 

The Town had a mountain of fraudulent and extortionate conduct to present in the hopes of creating an exception to the general rule in Pendergraft and Raney. Consequently, there was no merit to DeMartini’s contention that the Town lacked a reasonable belief that it might prevail in the RICO lawsuit, and the Court concluded the Town had probable cause to file the civil RICO lawsuit.

 

David J. Stander is an Attorney who focuses on Civil RICO litigation.

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