Bloomberg Law November 3, 2022
- Civil RICO claims unusual in hacking cases, attorneys say
- Cases against law firm will be difficult to prove, they add
Two lawsuits against Dechert LLP for its alleged role in an international “hack and dump scheme” will likely face challenges in proving the global law firm is civilly liable under a racketeering law, an unusual claim in cyberattack cases, attorneys say.
Last month, an Iranian American aviation executive and a former Wall Street Journal reporter separately sued Dechert and a litany of other entities, both claiming civil violations of the federal Racketeer Influenced and Corrupt Organizations Act after the firm allegedly led a hacking campaign to steal and reveal documents and communications that damaged their respective businesses.
That statute is most commonly used in the non-criminal context to address business disputes, and civil RICO cases over computer hacking are uncommon, attorneys say.
Despite the fact-specific nature of the Dechert litigation, RICO could be attractive to plaintiffs because it offers triple damages and attorneys’ fees, lawyers said. However, RICO litigation is highly complex and difficult to win, they added.
“Because the civil RICO claims have these draconian penalties, courts look at civil RICO claims very strictly,” said David J. Stander, a solo practitioner who spent two decades as a trial attorney for the Department of Justice’s Organized Crime and Racketeering Section.
Defendants seeking dismissal of civil RICO claims “usually” prevail, he said. “If I were to give a percentage, I’d say maybe 80% of the time they’re successful,” Stander said.
Hacking Allegations
Both cases claim that Dechert partner Neil Gerrard, the firm’s former co-head of white-collar litigation, helped orchestrate an effort that began as early as 2015 to hack aviation executive Farhad Azima’s email accounts and publish his messages, photos, financial records, and other information on behalf of Gerrard’s alleged client, the Ras Al Khaimah Investment Authority.
RAKIA, which is the sovereign wealth fund of a member of the United Arab Emirates, and Azima were embroiled in litigation over a hotel sale, and the “hack and dump scheme” was intended to give the emirate leverage, according to the two lawsuits.
Dechert and others are accused of engaging in various racketeering activities related to the hacks and attempts to cover them up. Azima is seeking over $100 million in
Former WSJ reporter Jay Solomon said in his lawsuit that his communications with Azima, who he considered a source, were stolen by the hackers and shared with his employer in an effort to discredit his work.
Azima reportedly offered Solomon a small stake in one of his businesses, and the journalist was subsequently fired from the WSJ, “blackballed” by the journalism industry, and lost money on book publishing contracts, according to the lawsuit. Solomon is seeking at least $75,000 in statutory damages and “and further monetary damages in an amount to be proven at trial.”
Dechert LLP denied the claims in both lawsuits in an emailed statement, and attorneys for Gerrard and Azima did not respond to multiple emailed requests for comment.
Cases’ Strengths, Weaknesses
Illegal hacking doesn’t qualify as a predicate RICO crime, but it could be associated with other acts that are applicable under RICO like theft of trade secrets or economic espionage, former DOJ attorney David J. Stander said.
Based on the facts presented in Azima’s complaint, the lawyers missed an opportunity to cite two federal laws that address hacking activity and qualify for civil RICO claims, said Jay Bogan, a Kilpatrick Townsend & Stockton LLP partner who
represents businesses in civil RICO litigation.
The alleged hacking and stealing of trade secrets for the benefit of a foreign actor would fall under both the Federal Defend Trade Secrets Act and the Federal Espionage Act, Bogan said. The most common statutory method of addressing hacking, the Computer Fraud and Abuse Act, does not fall under RICO, he added.
Azima’s lawsuit includes a litany of other allegations—like obstruction of justice and witness tampering related to covering up the hack—that are predicate crimes under RICO and are better suited to implicate the wide umbrella of that statute, according to Bogan.
But while the Azima lawsuit is well organized and presents compelling details to tie its allegations to civil RICO violations, the case presented by Solomon contains less direct evidence to support its RICO claims, he said.
Solomon’s lawsuit is less likely than Azima’s to survive a motion to dismiss, said Bridget DuPey, an associate at Brownstein Hyatt Farber Schreck LLP who penned a blog post series on civil RICO law for the firm.
“I was struck by kind of a lack of detail in the Solomon complaint that was present in the Azima complaint, not in a way that necessarily makes it fatal,” DuPey said. “But pleading particulars as in dates and times and who participated in conversations, where they occurred, things of that nature, did seem to be a bit lacking in that regard, which could make it more susceptible to such a challenge.”
The ties to RICO violations in Solomon’s lawsuit are “sloppy,” and fail to provide enough details that establish a pattern of racketeering activity to the standard civil RICO claims requires, Bogan said.
Stander Law RICO Report 