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Civil RICO Liability: Forced Divestiture, Dissolution Or Reorganization


The Racketeer Influenced & Corrupt Organization Act (RICO Act) contains civil provisions. A civil RICO lawsuit may be filed by an individual, private company, or a government agency. One of the most notable things about civil RICO litigation is that plaintiffs can obtain treble damages. Defendants could face significant financial liability if they lose a case.

Beyond treble damages, a court can also impose an equitable remedy against a RICO defendant. Among other things, equitable relief can include the forced divestiture from or breaking up of a company. In this blog post, our West Palm Beach RICO claims lawyers explain what defendants need to know about the remedy of divestiture, dissolution, or reorganization.

Equitable Remedy: Divestiture, Dissolution, and Reorganization

Companies or organizations that are engaged in racketeering activity can face significant sanctions under federal law—even if only civil liability is found and not criminal liability. Under 18 U.S. Code  § 1964, federal courts have the legal authority to order a person to “divest himself of any interest, direct or indirect, in any enterprise” if they find a civil RICO violation. In practice, courts have determined that they have the power to order divestiture, dissolution, and/or reorganization.

Put another way, a court can break apart a business, organization, or enterprise engaged in racketeering activity. When a civil RICO violation is raised, defendants could face major financial liability in the form of treble damages. In some cases, the equitable remedies—whether for divestiture or outright dissolution of a company—could be even more significant.

An Early Case Example: Civil RICO Liability and a Bar Owner 

One of the most instructive examples of how federal courts use the divestiture, dissolution, and reorganization equitable remedy comes from an early RICO case called United States v. Cappetto. In 1974, an appeals court rejected the defendant’s argument that the equitable remedies contained in the Racketeer Influenced & Corrupt Organization Act were unconstitutional.

The case involves allegations that several individuals were operating an illegal sports betting and horse racing betting ring out of the Western Avenue Billiards club in Chicago, Illinois. The owner of the bar—a man named Leonard L. Cappetto—allegedly had full knowledge of the operation. Indeed, the government contended that he received a partial cut from the proceeds.

Given the allegations, the government sought forced divestiture from the company. The defendant, Mr. Cappetto, challenged the constitutionality of the equitable remedies provision of the RICO act. In reviewing the matter, the court ruled that divestiture, dissolution, or reorganization are all appropriate equitable remedies when merited by the facts of the case.

Contact Our South Florida RICO Lawyers for Guidance and Support

At Pike & Lustig, LLP, we are proud to provide the highest level of client service and professional representation. Our legal team has the knowledge to  represent plaintiffs and defendants in complicated legal matters. If you are facing a civil RICO lawsuit and you have any questions about court-mandated divestiture, dissolution or reorganization, we can help. Call us now for an immediate consultation. We provide business litigation services from West Palm Beach to Miami.



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