Assume that, tomorrow, a large company advertises a "miracle pill" that it claims will cure all forms of cancer. The company uses a sophisticated national marketing campaign to convey a strong health assurance message, which it tailors to specific audiences: women with breast cancer, men with prostate cancer, older adults with intestinal cancer, and children with leukemia. In response to the national campaign, consumers across the country purchase the pill, which costs $10. Only then do consumers discover that the pill is worthless and that the company intentionally defrauded them.
The Racketeer Influenced and Corrupt Organizations ("RICO") statute provides a basis for prosecution of the hypothetical company. In essence, RICO prohibits securing control of an economic enterprise through a pattern of racketeering.' RICO defines "racketeering activity" to include mail and wire fraud; thus, it would encompass the hypothetical miracle pill fraud perpetrated through a national advertising campaign. RICO's central statutory objective is to deter the unlawful racketeering conduct it proscribes, and to support this objective, the statute authorizes dual enforcement: in addition to providing for public prosecution under 1964(a), the statute authorizes private lawsuits by the injured consumers under 1964(c).
The decision in U.S. v. Phillip Morris U.S.A., Inc., however, has significantly weakened public prosecution under RICO of the hypothetical miracle pill company. In Phillip Morris, the United States Court of Appeals for the District of Columbia held that the government may not seek the disgorgement of a RICO defendant's illegitimate profits, including profits acquired by defrauding consumers. Other federal courts have adopted rules similar to Phillip Morris U.S.A.5 Without the disgorgement remedy, the government in a civil RICO case can request only limited equitable relief under 1964(a). Thus, private enforcement under 1964(c) which is not restricted to prospective relief-is the more effective vehicle to vindicate the statute's deterrence objective. Only under 1964(c) will perpetrators of mass fraud, such as the company that marketed the miracle pill, face a real threat of litigation commensurate with their harmful behavior.
Small Claim Mass Fraud Actions: A Proposal for Aggregate Litigation Under RICO,
61 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol61/iss2/9