US federal court dismisses with prejudice ex-employees RICO Act claim against BP
MOSCOW, June 19 (RAPSI, Ingrid Burke) - A US federal court has dismissed a former BP employee’s Racketeer Influenced and Corrupt Organizations (RICO) Act claim with prejudice, finding that she had failed to allege a domestic pattern of racketeering that had caused injury to her, according to court documents obtained by RAPSI.
The RICO Act, which essentially prohibits racketeering in interstate and foreign business enterprises, aims to eradicate organized crime.
Initially, plaintiff Lillian Borich had asserted five claims in state court against five defendants, including BP plc, BP Exploration & Production, Inc., BP Products North America, Inc., BP America, Inc., and Robert Dudley. The RICO charge gave rise to federal jurisdiction, and the defendants then removed the case to federal court.
After the initial complaint was dismissed for failure to state a claim, Borich filed an amended complaint. After the defendants moved to dismiss, she filed the second amended complaint.
The second-amended complaint features a RICO claim as well as claims for fraudulent misrepresentation and breach of contract, and seeks to recover wages that Borich claims she would have earned had BP not allegedly “fraudulently induced” her to accept a position that she was ultimately discharged from.
The present opinion relied on the facts established by the second-amended complaint, which asserted that in 2007 Borich applied for the newly created position of Business-to-Business Marketing Manager for TNK-BP, a then-new position created to replace the previous system of sales made through wholesalers. At the time, Borich had been working with the company for approximately three years.
Although her interviewer, Mark Goodwin, had expressed sincerity in BP’s desire to transition to a Business-to-Business model, Borich asserted in the second-amended complaint: “BP and Goodwin knew at the time that it was merely attempting to change BP’s business model from the use of wholesalers executing sales through bribes to the Business-to-Business model. BP knew that such a shift would be opposed by TNK, BP’s Russian partner in TNK-BP. Thus, it knew the success of the Business-to-Business group Borich was being hired to head was predicated upon a very uncertain change in the TNK-BP culture and way of conducting business . . .”
Borich then signed the contract and began reviewing materials on the Business-to-Business oil sales model provided to her by her by Goodwin before moving to Ukraine to start her new job.
By December 2007, according to the opinion, BP had either given up on the Business-to-Business model or had given up on Borich selling according to the model. Borich then learned that BP had planned to transfer her to the commercial sales department, where she was expected to execute sales through middlemen. According to the opinion, Borich believed that this work would be dangerous. She took medical leave at some point after that, and was then terminated in March.
Charging that BP was “deeply engaged in a bribery-based business model,” Borich alleged in the second-amended complaint that, “BP bribes were regularly approved and paid by Goodwin from a special BP account.” She asserted that these bribes were regularly paid out to local officials and a business called Donetsk JV.
Borich claimed that these acts constituted violations of the Foreign Corrupt Practices Act, although rather than asserting damages as a result of these violations, she endeavored to use them in order to “establish a pattern of racketeering activity.”
She further claimed that she was fraudulently induced to take the job, and that BP breached its contract with her by failing to follow through on sales that she had arranged.
Under US law, a court is entitled to dismiss a claim if the plaintiff fails “to state a claim upon which relief can be granted.” To avoid this outcome, a plaintiff must give defendants fair notice of the claim and its basis. The claim must suggest that the plaintiff has a right to relief. It must be plausible. And certain allegations must be adequately particular, including allegations of fraud.
Considering these requirements as well as the elements of RICO, the court opined, “plaintiff’s RICO claim has a number of flaws, all of which are fatal. In a nutshell, Borich has failed to allege a domestic pattern of racketeering activity from which she was injured.”
Borich had asserted among other points that BP used email and fax communication to induce her fraudulently to accept the position, and that this constituted wire fraud. The defense objected, pointing to a lack of sufficient particularity. While the court acknowledged this to be true in certain cases, it noted, “[t]he bigger problem with Borich’s wire fraud theory, though, is the absence of fraud.”
Toward this end, the court noted that Borich’s claim that Goodwin had expressed BP’s sincere desire to shift toward a Business-to-Business model was not inconsistent with her allegation that BP and Goodwin knew that it was only attempting to change BP’s business model. Thus, neither is necessarily a misrepresentation.
As explained by the opinion, “That BP did not succeed (according to plaintiff’s allegations) in changing to a business-to-business model does not suggest fraud. It merely suggests failure.”
In its last opinion on the Borich case, the court had established that its determination of whether RICO could apply extraterritorially would hang on the predicate acts – such as Borich’s wire fraud allegation – and their consequences. In the present opinion, the court held that she had alleged no domestic predicate acts, and had thus failed to establish a domestic racketeering pattern.
In this light, her claim that BP was “deeply engaged in a bribery-based business model” in Ukraine proved irrelevant, as RICO does not apply extraterritorially.
Furthermore, Borich lacks standing to bring a RICO claim as she admitted in the second-amended complaint that she had not asserted any personal damages as a result of BP’s alleged RICO violations. Her claims for lost wages, travel expenses, etc. arose as a result of her job termination, which is not a predicate act under RICO given the circumstances.
In closing, the court remanded the other two claims – both of which arise under state law – back to the state court in which it was initially filed.
The RICO claim was dismissed with prejudice. In the court’s view, the issues described above “are not the only problems with plaintiff’s RICO claim, but they are enough to convince the Court that they cannot be cured with a fourth pleading. Count I is dismissed with prejudice.”